Correlation Between E Ink and Chunghwa Precision

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

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

Diversification Opportunities for E Ink and Chunghwa Precision

-0.63

Correlation Coefficient

E Ink  Chunghwa Precision

Excellent diversification

The 3 months correlation between 8069 and Chunghwa is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding E Ink Holdings and Chunghwa Precision Test in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Precision Test and E Ink 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 E Ink Holdings are associated (or correlated) with Chunghwa Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Precision Test has no effect on the direction of E Ink i.e., E Ink and Chunghwa Precision go up and down completely randomly.

Pair Corralation between E Ink and Chunghwa Precision

Assuming the 90 days trading horizon E Ink Holdings is expected to generate 0.76 times more return on investment than Chunghwa Precision. However, E Ink Holdings is 1.31 times less risky than Chunghwa Precision. It trades about 0.02 of its potential returns per unit of risk. Chunghwa Precision Test is currently generating about -0.05 per unit of risk. If you would invest  28,200  in E Ink Holdings on December 4, 2024 and sell it today you would earn a total of  150.00  from holding E Ink Holdings or generate 0.53% return on investment over 90 days.

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

E Ink Holdings  vs.  Chunghwa Precision Test

E Ink Holdings

Risk-Adjusted Performance

Weak

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

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 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 E Ink and Chunghwa Precision

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

The idea behind E Ink Holdings and Chunghwa Precision Test 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.