Correlation Between Chung Lien and U Ming

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

Diversification Opportunities for Chung Lien and U Ming

-0.33

Correlation Coefficient

Chung Lien  U Ming

Very good diversification

The 3 months correlation between Chung and 2606 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Chung Lien Transportation and U Ming Marine Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Ming Marine 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 U Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Ming Marine has no effect on the direction of Chung Lien i.e., Chung Lien and U Ming go up and down completely randomly.

Pair Corralation between Chung Lien and U Ming

Assuming the 90 days trading horizon Chung Lien Transportation is expected to under-perform the U Ming. But the stock apears to be less risky and, when comparing its historical volatility, Chung Lien Transportation is 2.66 times less risky than U Ming. The stock trades about -0.05 of its potential returns per unit of risk. The U Ming Marine Transport is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,890  in U Ming Marine Transport on December 30, 2024 and sell it today you would earn a total of  850.00  from holding U Ming Marine Transport or generate 14.43% return on investment over 90 days.

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

Chung Lien Transportation  vs.  U Ming Marine Transport

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.

U Ming Marine

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chung Lien and U Ming

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

The idea behind Chung Lien Transportation and U Ming Marine Transport 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.