Correlation Between Chung Lien and Johnson Chemical

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

Diversification Opportunities for Chung Lien and Johnson Chemical

-0.09

Correlation Coefficient

Chung Lien  Johnson Chemical

Good diversification

The 3 months correlation between Chung and Johnson is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Chung Lien Transportation and Johnson Chemical Pharmaceutica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Chemical Pha 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 Johnson Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Chemical Pha has no effect on the direction of Chung Lien i.e., Chung Lien and Johnson Chemical go up and down completely randomly.

Pair Corralation between Chung Lien and Johnson Chemical

Assuming the 90 days trading horizon Chung Lien Transportation is expected to under-perform the Johnson Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Chung Lien Transportation is 3.32 times less risky than Johnson Chemical. The stock trades about -0.06 of its potential returns per unit of risk. The Johnson Chemical Pharmaceutical is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,011  in Johnson Chemical Pharmaceutical on October 4, 2024 and sell it today you would earn a total of  3,139  from holding Johnson Chemical Pharmaceutical or generate 78.26% 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.  Johnson Chemical Pharmaceutica

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.

Johnson Chemical Pha

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Chemical Pharmaceutical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Johnson Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chung Lien and Johnson Chemical

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

The idea behind Chung Lien Transportation and Johnson Chemical Pharmaceutical 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 CEOs Directory module to screen CEOs from public companies around the world.