Correlation Between Chung Lien and Shan Loong

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

Diversification Opportunities for Chung Lien and Shan Loong

0.48

Correlation Coefficient

Chung Lien  Shan Loong

Very weak diversification

The 3 months correlation between Chung and Shan is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Chung Lien Transportation and Shan Loong Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Loong Transport 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 Shan Loong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Loong Transport has no effect on the direction of Chung Lien i.e., Chung Lien and Shan Loong go up and down completely randomly.

Pair Corralation between Chung Lien and Shan Loong

Assuming the 90 days trading horizon Chung Lien Transportation is expected to generate 0.83 times more return on investment than Shan Loong. However, Chung Lien Transportation is 1.2 times less risky than Shan Loong. It trades about -0.03 of its potential returns per unit of risk. Shan Loong Transportation Co is currently generating about -0.18 per unit of risk. If you would invest  4,580  in Chung Lien Transportation on October 4, 2024 and sell it today you would lose (390.00) from holding Chung Lien Transportation or give up 8.52% of portfolio value over 90 days.

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

Chung Lien Transportation  vs.  Shan Loong Transportation 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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Shan Loong Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shan Loong Transportation Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 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 Shan Loong

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

The idea behind Chung Lien Transportation and Shan Loong Transportation 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.