Correlation Between Taiwan Hon and Chen Full

Can any of the company-specific risk be diversified away by investing in both Taiwan Hon and Chen Full 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 Taiwan Hon and Chen Full into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Taiwan Hon Chuan and Chen Full International, you can compare the effects of market volatilities on Taiwan Hon and Chen Full 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 Taiwan Hon with a short position of Chen Full. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Hon and Chen Full.

Diversification Opportunities for Taiwan Hon and Chen Full

0.35

Correlation Coefficient

Taiwan Hon  Chen Full

Weak diversification

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

Pair Corralation between Taiwan Hon and Chen Full

Assuming the 90 days trading horizon Taiwan Hon Chuan is expected to generate 0.89 times more return on investment than Chen Full. However, Taiwan Hon Chuan is 1.13 times less risky than Chen Full. It trades about 0.17 of its potential returns per unit of risk. Chen Full International is currently generating about 0.13 per unit of risk. If you would invest  14,850  in Taiwan Hon Chuan on December 5, 2024 and sell it today you would earn a total of  1,750  from holding Taiwan Hon Chuan or generate 11.78% return on investment over 90 days.

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

Taiwan Hon Chuan  vs.  Chen Full International

Taiwan Hon Chuan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Hon Chuan are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Hon showed solid returns over the last few months and may actually be approaching a breakup point.

Chen Full International

Risk-Adjusted Performance

OK

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

Pair Trading with Taiwan Hon and Chen Full

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

The idea behind Taiwan Hon Chuan and Chen Full 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 CEOs Directory module to screen CEOs from public companies around the world.