Correlation Between Chung Lien and Elan Microelectronics

Can any of the company-specific risk be diversified away by investing in both Chung Lien and Elan Microelectronics 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 Chung Lien and Elan Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chung Lien Transportation and Elan Microelectronics Corp, you can compare the effects of market volatilities on Chung Lien and Elan Microelectronics 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 Chung Lien with a short position of Elan Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Lien and Elan Microelectronics.

Diversification Opportunities for Chung Lien and Elan Microelectronics

0.44

Correlation Coefficient

Chung Lien  Elan Microelectronics

Very weak diversification

The 3 months correlation between Chung and Elan is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chung Lien Transportation and Elan Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elan Microelectronics and Chung Lien 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 Chung Lien Transportation are associated (or correlated) with Elan Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elan Microelectronics has no effect on the direction of Chung Lien i.e., Chung Lien and Elan Microelectronics go up and down completely randomly.

Pair Corralation between Chung Lien and Elan Microelectronics

Assuming the 90 days trading horizon Chung Lien Transportation is expected to under-perform the Elan Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Chung Lien Transportation is 1.4 times less risky than Elan Microelectronics. The stock trades about -0.01 of its potential returns per unit of risk. The Elan Microelectronics Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  14,750  in Elan Microelectronics Corp on December 21, 2024 and sell it today you would earn a total of  1,100  from holding Elan Microelectronics Corp or generate 7.46% return on investment over 90 days.

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

Chung Lien Transportation  vs.  Elan Microelectronics Corp

Chung Lien Transportation

Risk-Adjusted Performance

Very Weak

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

Elan Microelectronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Elan Microelectronics Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elan Microelectronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chung Lien and Elan Microelectronics

The main advantage of trading using opposite Chung Lien and Elan Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Lien position performs unexpectedly, Elan Microelectronics 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 Elan Microelectronics will offset losses from the drop in Elan Microelectronics' long position.

The idea behind Chung Lien Transportation and Elan Microelectronics Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.