Correlation Between Tung Ho and Chia Her

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

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

Diversification Opportunities for Tung Ho and Chia Her

0.07

Correlation Coefficient

Tung Ho  Chia Her

Significant diversification

The 3 months correlation between Tung and Chia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Textile 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 Tung Ho 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 Tung Ho Textile 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 Tung Ho i.e., Tung Ho and Chia Her go up and down completely randomly.

Pair Corralation between Tung Ho and Chia Her

Assuming the 90 days trading horizon Tung Ho is expected to generate 2.91 times less return on investment than Chia Her. But when comparing it to its historical volatility, Tung Ho Textile is 2.28 times less risky than Chia Her. It trades about 0.1 of its potential returns per unit of risk. Chia Her Industrial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,855  in Chia Her Industrial on September 4, 2024 and sell it today you would earn a total of  545.00  from holding Chia Her Industrial or generate 29.38% return on investment over 90 days.

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

Tung Ho Textile  vs.  Chia Her Industrial

Tung Ho Textile

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tung Ho Textile are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tung Ho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chia Her Industrial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Her Industrial are ranked lower than 10 (%) 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 Tung Ho and Chia Her

The main advantage of trading using opposite Tung Ho and Chia Her positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tung Ho 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 Tung Ho Textile 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..