Correlation Between Chia Chang and Wan Hai

Can any of the company-specific risk be diversified away by investing in both Chia Chang and Wan Hai at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chia Chang and Wan Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chia Chang Co and Wan Hai Lines, you can compare the effects of market volatilities on Chia Chang and Wan Hai and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chia Chang with a short position of Wan Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Chang and Wan Hai.

Diversification Opportunities for Chia Chang and Wan Hai

0.08

Correlation Coefficient

Chia Chang  Wan Hai

Significant diversification

The 3 months correlation between Chia and Wan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chia Chang Co and Wan Hai Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wan Hai Lines and Chia Chang is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chia Chang Co are associated (or correlated) with Wan Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wan Hai Lines has no effect on the direction of Chia Chang i.e., Chia Chang and Wan Hai go up and down completely randomly.

Pair Corralation between Chia Chang and Wan Hai

Assuming the 90 days trading horizon Chia Chang Co is expected to under-perform the Wan Hai. But the stock apears to be less risky and, when comparing its historical volatility, Chia Chang Co is 2.42 times less risky than Wan Hai. The stock trades about -0.07 of its potential returns per unit of risk. The Wan Hai Lines is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,720  in Wan Hai Lines on October 7, 2024 and sell it today you would earn a total of  750.00  from holding Wan Hai Lines or generate 9.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chia Chang Co  vs.  Wan Hai Lines

Chia Chang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chia Chang Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Wan Hai Lines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wan Hai Lines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wan Hai is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chia Chang and Wan Hai

The main advantage of trading using opposite Chia Chang and Wan Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia Chang position performs unexpectedly, Wan Hai can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wan Hai will offset losses from the drop in Wan Hai's long position.

The idea behind Chia Chang Co and Wan Hai Lines pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.