Correlation Between Taiwan Hon and CHC Resources

Can any of the company-specific risk be diversified away by investing in both Taiwan Hon and CHC Resources 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 CHC Resources 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 CHC Resources Corp, you can compare the effects of market volatilities on Taiwan Hon and CHC Resources 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 CHC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Hon and CHC Resources.

Diversification Opportunities for Taiwan Hon and CHC Resources

0.78

Correlation Coefficient

Taiwan Hon  CHC Resources

Poor diversification

The 3 months correlation between Taiwan and CHC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Hon Chuan and CHC Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Resources Corp 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 CHC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Resources Corp has no effect on the direction of Taiwan Hon i.e., Taiwan Hon and CHC Resources go up and down completely randomly.

Pair Corralation between Taiwan Hon and CHC Resources

Assuming the 90 days trading horizon Taiwan Hon is expected to generate 1.55 times less return on investment than CHC Resources. In addition to that, Taiwan Hon is 2.46 times more volatile than CHC Resources Corp. It trades about 0.04 of its total potential returns per unit of risk. CHC Resources Corp is currently generating about 0.17 per unit of volatility. If you would invest  6,720  in CHC Resources Corp on December 28, 2024 and sell it today you would earn a total of  370.00  from holding CHC Resources Corp or generate 5.51% return on investment over 90 days.

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

Taiwan Hon Chuan  vs.  CHC Resources Corp

Taiwan Hon Chuan

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Hon Chuan are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Hon is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CHC Resources Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CHC Resources Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CHC Resources is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Taiwan Hon and CHC Resources

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

The idea behind Taiwan Hon Chuan and CHC Resources Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.