Correlation Between Chia Hsin and Ruentex Materials

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

By analyzing existing cross correlation between Chia Hsin Cement and Ruentex Materials Co, you can compare the effects of market volatilities on Chia Hsin and Ruentex Materials 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 Chia Hsin with a short position of Ruentex Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Hsin and Ruentex Materials.

Diversification Opportunities for Chia Hsin and Ruentex Materials

-0.01

Correlation Coefficient

Chia Hsin  Ruentex Materials

Good diversification

The 3 months correlation between Chia and Ruentex is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Chia Hsin Cement and Ruentex Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Materials and Chia Hsin 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 Chia Hsin Cement are associated (or correlated) with Ruentex Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Materials has no effect on the direction of Chia Hsin i.e., Chia Hsin and Ruentex Materials go up and down completely randomly.

Pair Corralation between Chia Hsin and Ruentex Materials

Assuming the 90 days trading horizon Chia Hsin Cement is expected to generate 0.75 times more return on investment than Ruentex Materials. However, Chia Hsin Cement is 1.33 times less risky than Ruentex Materials. It trades about 0.04 of its potential returns per unit of risk. Ruentex Materials Co is currently generating about -0.02 per unit of risk. If you would invest  1,770  in Chia Hsin Cement on September 13, 2024 and sell it today you would earn a total of  30.00  from holding Chia Hsin Cement or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Chia Hsin Cement  vs.  Ruentex Materials Co

Chia Hsin Cement

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Hsin Cement are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chia Hsin is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ruentex Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ruentex Materials 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 Chia Hsin and Ruentex Materials

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

The idea behind Chia Hsin Cement and Ruentex Materials Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.