Correlation Between Farglory Life and Chung Hwa

Can any of the company-specific risk be diversified away by investing in both Farglory Life and Chung Hwa 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 Farglory Life and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Farglory Life Insurance and Chung Hwa Food, you can compare the effects of market volatilities on Farglory Life and Chung Hwa 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 Farglory Life with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farglory Life and Chung Hwa.

Diversification Opportunities for Farglory Life and Chung Hwa

0.33

Correlation Coefficient

Farglory Life  Chung Hwa

Weak diversification

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

Pair Corralation between Farglory Life and Chung Hwa

Assuming the 90 days trading horizon Farglory Life Insurance is expected to generate 107.81 times more return on investment than Chung Hwa. However, Farglory Life is 107.81 times more volatile than Chung Hwa Food. It trades about 0.09 of its potential returns per unit of risk. Chung Hwa Food is currently generating about -0.08 per unit of risk. If you would invest  1,106  in Farglory Life Insurance on October 1, 2024 and sell it today you would earn a total of  534.00  from holding Farglory Life Insurance or generate 48.28% return on investment over 90 days.

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

Farglory Life Insurance  vs.  Chung Hwa Food

Farglory Life Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Life Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Farglory Life showed solid returns over the last few months and may actually be approaching a breakup point.

Chung Hwa Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hwa Food has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Hwa 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 Farglory Life and Chung Hwa

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

The idea behind Farglory Life Insurance and Chung Hwa Food 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.