Correlation Between Chunghwa Precision and Hwang Chang

Can any of the company-specific risk be diversified away by investing in both Chunghwa Precision and Hwang Chang 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 Chunghwa Precision and Hwang Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chunghwa Precision Test and Hwang Chang General, you can compare the effects of market volatilities on Chunghwa Precision and Hwang Chang 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 Chunghwa Precision with a short position of Hwang Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Precision and Hwang Chang.

Diversification Opportunities for Chunghwa Precision and Hwang Chang

-0.58

Correlation Coefficient

Chunghwa Precision  Hwang Chang

Excellent diversification

The 3 months correlation between Chunghwa and Hwang is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Precision Test and Hwang Chang General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwang Chang General and Chunghwa Precision 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 Chunghwa Precision Test are associated (or correlated) with Hwang Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwang Chang General has no effect on the direction of Chunghwa Precision i.e., Chunghwa Precision and Hwang Chang go up and down completely randomly.

Pair Corralation between Chunghwa Precision and Hwang Chang

Assuming the 90 days trading horizon Chunghwa Precision Test is expected to under-perform the Hwang Chang. But the stock apears to be less risky and, when comparing its historical volatility, Chunghwa Precision Test is 1.38 times less risky than Hwang Chang. The stock trades about -0.08 of its potential returns per unit of risk. The Hwang Chang General is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,320  in Hwang Chang General on December 24, 2024 and sell it today you would earn a total of  2,240  from holding Hwang Chang General or generate 30.6% return on investment over 90 days.

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

Chunghwa Precision Test  vs.  Hwang Chang General

Chunghwa Precision Test

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chunghwa Precision Test has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hwang Chang General

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hwang Chang General are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hwang Chang showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chunghwa Precision and Hwang Chang

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

The idea behind Chunghwa Precision Test and Hwang Chang General 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.