Correlation Between Chunghwa Precision and Datavan International

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

Diversification Opportunities for Chunghwa Precision and Datavan International

0.65

Correlation Coefficient

Chunghwa Precision  Datavan International

Poor diversification

The 3 months correlation between Chunghwa and Datavan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Precision Test and Datavan International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datavan International 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 Datavan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datavan International has no effect on the direction of Chunghwa Precision i.e., Chunghwa Precision and Datavan International go up and down completely randomly.

Pair Corralation between Chunghwa Precision and Datavan International

Assuming the 90 days trading horizon Chunghwa Precision Test is expected to generate 1.52 times more return on investment than Datavan International. However, Chunghwa Precision is 1.52 times more volatile than Datavan International. It trades about -0.08 of its potential returns per unit of risk. Datavan International is currently generating about -0.29 per unit of risk. If you would invest  87,900  in Chunghwa Precision Test on October 10, 2024 and sell it today you would lose (6,200) from holding Chunghwa Precision Test or give up 7.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Chunghwa Precision Test  vs.  Datavan International

Chunghwa Precision Test

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chunghwa Precision Test are ranked lower than 14 (%) 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.

Datavan International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Datavan International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Datavan International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chunghwa Precision and Datavan International

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

The idea behind Chunghwa Precision Test and Datavan International 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.