Correlation Between Sun Max and Chia Yi

Can any of the company-specific risk be diversified away by investing in both Sun Max and Chia Yi 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 Sun Max and Chia Yi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sun Max Tech and Chia Yi Steel, you can compare the effects of market volatilities on Sun Max and Chia Yi 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 Sun Max with a short position of Chia Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Max and Chia Yi.

Diversification Opportunities for Sun Max and Chia Yi

0.04

Correlation Coefficient

Sun Max  Chia Yi

Significant diversification

The 3 months correlation between Sun and Chia is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sun Max Tech and Chia Yi Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Yi Steel and Sun Max 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 Sun Max Tech are associated (or correlated) with Chia Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Yi Steel has no effect on the direction of Sun Max i.e., Sun Max and Chia Yi go up and down completely randomly.

Pair Corralation between Sun Max and Chia Yi

Assuming the 90 days trading horizon Sun Max Tech is expected to under-perform the Chia Yi. But the stock apears to be less risky and, when comparing its historical volatility, Sun Max Tech is 1.81 times less risky than Chia Yi. The stock trades about -0.02 of its potential returns per unit of risk. The Chia Yi Steel is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,090  in Chia Yi Steel on October 27, 2024 and sell it today you would earn a total of  5.00  from holding Chia Yi Steel or generate 0.46% return on investment over 90 days.

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

Sun Max Tech  vs.  Chia Yi Steel

Sun Max Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Chia Yi Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Yi Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chia Yi is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Sun Max and Chia Yi

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

The idea behind Sun Max Tech and Chia Yi Steel 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 Transaction History module to view history of all your transactions and understand their impact on performance.