Correlation Between Sporton International and Chung Hwa

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

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

Diversification Opportunities for Sporton International and Chung Hwa

0.3

Correlation Coefficient

Sporton International  Chung Hwa

Weak diversification

The 3 months correlation between Sporton and Chung is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sporton International 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 Sporton International 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 Sporton International 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 Sporton International i.e., Sporton International and Chung Hwa go up and down completely randomly.

Pair Corralation between Sporton International and Chung Hwa

Assuming the 90 days trading horizon Sporton International is expected to under-perform the Chung Hwa. In addition to that, Sporton International is 1.41 times more volatile than Chung Hwa Food. It trades about -0.03 of its total potential returns per unit of risk. Chung Hwa Food is currently generating about 0.13 per unit of volatility. If you would invest  8,740  in Chung Hwa Food on December 24, 2024 and sell it today you would earn a total of  540.00  from holding Chung Hwa Food or generate 6.18% return on investment over 90 days.

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

Sporton International  vs.  Chung Hwa Food

Sporton International

Risk-Adjusted Performance

Very Weak

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

Chung Hwa Food

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Hwa Food are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chung Hwa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sporton International and Chung Hwa

The main advantage of trading using opposite Sporton International and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sporton International 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 Sporton International 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.