Correlation Between Nasdaq and Chung Hsin

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

By analyzing existing cross correlation between Nasdaq Inc and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Nasdaq and Chung Hsin 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 Nasdaq with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Chung Hsin.

Diversification Opportunities for Nasdaq and Chung Hsin

-0.03

Correlation Coefficient

Nasdaq  Chung Hsin

Good diversification

The 3 months correlation between Nasdaq and Chung is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Nasdaq i.e., Nasdaq and Chung Hsin go up and down completely randomly.

Pair Corralation between Nasdaq and Chung Hsin

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.62 times more return on investment than Chung Hsin. However, Nasdaq Inc is 1.61 times less risky than Chung Hsin. It trades about 0.04 of its potential returns per unit of risk. Chung Hsin Electric Machinery is currently generating about -0.06 per unit of risk. If you would invest  8,075  in Nasdaq Inc on December 3, 2024 and sell it today you would earn a total of  193.00  from holding Nasdaq Inc or generate 2.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

Nasdaq Inc  vs.  Chung Hsin Electric Machinery

Nasdaq Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Chung Hsin Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chung Hsin Electric Machinery 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 Nasdaq and Chung Hsin

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

The idea behind Nasdaq Inc and Chung Hsin Electric Machinery 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.