Correlation Between Chung Lien and CKM Building

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

Diversification Opportunities for Chung Lien and CKM Building

-0.52

Correlation Coefficient

Chung Lien  CKM Building

Excellent diversification

The 3 months correlation between Chung and CKM is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chung Lien Transportation and CKM Building Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKM Building Material 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 CKM Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKM Building Material has no effect on the direction of Chung Lien i.e., Chung Lien and CKM Building go up and down completely randomly.

Pair Corralation between Chung Lien and CKM Building

Assuming the 90 days trading horizon Chung Lien Transportation is expected to under-perform the CKM Building. But the stock apears to be less risky and, when comparing its historical volatility, Chung Lien Transportation is 2.95 times less risky than CKM Building. The stock trades about -0.07 of its potential returns per unit of risk. The CKM Building Material is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,537  in CKM Building Material on October 24, 2024 and sell it today you would earn a total of  2,053  from holding CKM Building Material or generate 133.57% return on investment over 90 days.

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

Chung Lien Transportation  vs.  CKM Building Material

Chung Lien Transportation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Lien Transportation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

CKM Building Material

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CKM Building Material are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CKM Building 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 CKM Building

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

The idea behind Chung Lien Transportation and CKM Building Material 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.