Correlation Between Tong Hsing and Chung Hsin

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

By analyzing existing cross correlation between Tong Hsing Electronic and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Tong Hsing and Chung Hsin 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 Tong Hsing with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hsing and Chung Hsin.

Diversification Opportunities for Tong Hsing and Chung Hsin

-0.06

Correlation Coefficient

Tong Hsing  Chung Hsin

Good diversification

The 3 months correlation between Tong and Chung is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hsing Electronic and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Tong Hsing 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 Tong Hsing Electronic are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Tong Hsing i.e., Tong Hsing and Chung Hsin go up and down completely randomly.

Pair Corralation between Tong Hsing and Chung Hsin

Assuming the 90 days trading horizon Tong Hsing Electronic is expected to under-perform the Chung Hsin. But the stock apears to be less risky and, when comparing its historical volatility, Tong Hsing Electronic is 1.48 times less risky than Chung Hsin. The stock trades about -0.01 of its potential returns per unit of risk. The Chung Hsin Electric Machinery is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  12,150  in Chung Hsin Electric Machinery on October 9, 2024 and sell it today you would earn a total of  3,750  from holding Chung Hsin Electric Machinery or generate 30.86% return on investment over 90 days.

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

Tong Hsing Electronic  vs.  Chung Hsin Electric Machinery

Tong Hsing Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Chung Hsin Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hsin Electric Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Hsin 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 Tong Hsing and Chung Hsin

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

The idea behind Tong Hsing Electronic and Chung Hsin Electric Machinery 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.