Correlation Between Chung Lien and Amtran Technology

Can any of the company-specific risk be diversified away by investing in both Chung Lien and Amtran Technology 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 Amtran Technology 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 Amtran Technology Co, you can compare the effects of market volatilities on Chung Lien and Amtran Technology 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 Amtran Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Lien and Amtran Technology.

Diversification Opportunities for Chung Lien and Amtran Technology

0.44

Correlation Coefficient

Chung Lien  Amtran Technology

Very weak diversification

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

Pair Corralation between Chung Lien and Amtran Technology

Assuming the 90 days trading horizon Chung Lien Transportation is expected to under-perform the Amtran Technology. But the stock apears to be less risky and, when comparing its historical volatility, Chung Lien Transportation is 3.21 times less risky than Amtran Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Amtran Technology Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,005  in Amtran Technology Co on September 25, 2024 and sell it today you would earn a total of  895.00  from holding Amtran Technology Co or generate 89.05% 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.  Amtran Technology Co

Chung Lien Transportation

Risk-Adjusted Performance

0 of 100

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.

Amtran Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amtran Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Chung Lien and Amtran Technology

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

The idea behind Chung Lien Transportation and Amtran Technology Co 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.