Correlation Between Feng Tay and Chia Her

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

By analyzing existing cross correlation between Feng Tay Enterprises and Chia Her Industrial, you can compare the effects of market volatilities on Feng Tay and Chia Her 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 Feng Tay with a short position of Chia Her. Check out your portfolio center. Please also check ongoing floating volatility patterns of Feng Tay and Chia Her.

Diversification Opportunities for Feng Tay and Chia Her

-0.52

Correlation Coefficient

Feng Tay  Chia Her

Excellent diversification

The 3 months correlation between Feng and Chia is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Feng Tay Enterprises and Chia Her Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Her Industrial and Feng Tay 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 Feng Tay Enterprises are associated (or correlated) with Chia Her. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Her Industrial has no effect on the direction of Feng Tay i.e., Feng Tay and Chia Her go up and down completely randomly.

Pair Corralation between Feng Tay and Chia Her

Assuming the 90 days trading horizon Feng Tay Enterprises is expected to under-perform the Chia Her. But the stock apears to be less risky and, when comparing its historical volatility, Feng Tay Enterprises is 1.81 times less risky than Chia Her. The stock trades about -0.03 of its potential returns per unit of risk. The Chia Her Industrial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,525  in Chia Her Industrial on September 12, 2024 and sell it today you would earn a total of  1,100  from holding Chia Her Industrial or generate 72.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Feng Tay Enterprises  vs.  Chia Her Industrial

Feng Tay Enterprises

Risk-Adjusted Performance

1 of 100

Weak

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

Chia Her Industrial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Her Industrial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chia Her showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Feng Tay and Chia Her

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

The idea behind Feng Tay Enterprises and Chia Her 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.