Correlation Between Chung Lien and Skardin Industrial

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

Diversification Opportunities for Chung Lien and Skardin Industrial

-0.13

Correlation Coefficient

Chung Lien  Skardin Industrial

Good diversification

The 3 months correlation between Chung and Skardin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Chung Lien Transportation and Skardin Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skardin Industrial 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 Skardin Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skardin Industrial has no effect on the direction of Chung Lien i.e., Chung Lien and Skardin Industrial go up and down completely randomly.

Pair Corralation between Chung Lien and Skardin Industrial

Assuming the 90 days trading horizon Chung Lien Transportation is expected to generate 0.18 times more return on investment than Skardin Industrial. However, Chung Lien Transportation is 5.6 times less risky than Skardin Industrial. It trades about -0.03 of its potential returns per unit of risk. Skardin Industrial is currently generating about -0.07 per unit of risk. If you would invest  4,320  in Chung Lien Transportation on October 4, 2024 and sell it today you would lose (135.00) from holding Chung Lien Transportation or give up 3.12% of portfolio value over 90 days.

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

Chung Lien Transportation  vs.  Skardin Industrial

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.

Skardin Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chung Lien and Skardin Industrial

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

The idea behind Chung Lien Transportation and Skardin Industrial 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.