Correlation Between HIM International and Chialin Precision

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

By analyzing existing cross correlation between HIM International Music and Chialin Precision Industrial, you can compare the effects of market volatilities on HIM International and Chialin 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 HIM International with a short position of Chialin Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of HIM International and Chialin Precision.

Diversification Opportunities for HIM International and Chialin Precision

-0.35

Correlation Coefficient

HIM International  Chialin Precision

Very good diversification

The 3 months correlation between HIM and Chialin is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding HIM International Music and Chialin Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chialin Precision and HIM International 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 HIM International Music are associated (or correlated) with Chialin Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chialin Precision has no effect on the direction of HIM International i.e., HIM International and Chialin Precision go up and down completely randomly.

Pair Corralation between HIM International and Chialin Precision

Assuming the 90 days trading horizon HIM International Music is expected to under-perform the Chialin Precision. But the stock apears to be less risky and, when comparing its historical volatility, HIM International Music is 1.15 times less risky than Chialin Precision. The stock trades about -0.04 of its potential returns per unit of risk. The Chialin Precision Industrial is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  9,250  in Chialin Precision Industrial on October 22, 2024 and sell it today you would lose (50.00) from holding Chialin Precision Industrial or give up 0.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

HIM International Music  vs.  Chialin Precision Industrial

HIM International Music

Risk-Adjusted Performance

0 of 100

Very Weak

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

Chialin Precision

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chialin Precision Industrial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chialin Precision may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HIM International and Chialin Precision

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

The idea behind HIM International Music and Chialin Precision Industrial 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 Stocks Directory module to find actively traded stocks across global markets.