Correlation Between Chunghwa Precision and Collins

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

Diversification Opportunities for Chunghwa Precision and Collins

-0.42

Correlation Coefficient

Chunghwa Precision  Collins

Very good diversification

The 3 months correlation between Chunghwa and Collins is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Precision Test and Collins Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins 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 Collins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins has no effect on the direction of Chunghwa Precision i.e., Chunghwa Precision and Collins go up and down completely randomly.

Pair Corralation between Chunghwa Precision and Collins

Assuming the 90 days trading horizon Chunghwa Precision Test is expected to generate 4.97 times more return on investment than Collins. However, Chunghwa Precision is 4.97 times more volatile than Collins Co. It trades about 0.2 of its potential returns per unit of risk. Collins Co is currently generating about -0.17 per unit of risk. If you would invest  53,300  in Chunghwa Precision Test on October 24, 2024 and sell it today you would earn a total of  28,900  from holding Chunghwa Precision Test or generate 54.22% 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.  Collins Co

Chunghwa Precision Test

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chunghwa Precision Test are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chunghwa Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Collins

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collins Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Chunghwa Precision and Collins

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

The idea behind Chunghwa Precision Test and Collins Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.