Correlation Between Chung Fu and Shieh Yih

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

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

Diversification Opportunities for Chung Fu and Shieh Yih

0.62

Correlation Coefficient

Chung Fu  Shieh Yih

Poor diversification

The 3 months correlation between Chung and Shieh is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chung Fu Tex International and Shieh Yih Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shieh Yih Machinery and Chung Fu 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 Chung Fu Tex International are associated (or correlated) with Shieh Yih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shieh Yih Machinery has no effect on the direction of Chung Fu i.e., Chung Fu and Shieh Yih go up and down completely randomly.

Pair Corralation between Chung Fu and Shieh Yih

Assuming the 90 days trading horizon Chung Fu Tex International is expected to under-perform the Shieh Yih. In addition to that, Chung Fu is 1.25 times more volatile than Shieh Yih Machinery. It trades about -0.14 of its total potential returns per unit of risk. Shieh Yih Machinery is currently generating about -0.01 per unit of volatility. If you would invest  4,025  in Shieh Yih Machinery on September 21, 2024 and sell it today you would lose (125.00) from holding Shieh Yih Machinery or give up 3.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Chung Fu Tex International  vs.  Shieh Yih Machinery

Chung Fu Tex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Fu Tex International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Shieh Yih Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shieh Yih Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shieh Yih 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 Chung Fu and Shieh Yih

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

The idea behind Chung Fu Tex International and Shieh Yih 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.