Correlation Between Chia Her and Cheng Shin

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

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

Diversification Opportunities for Chia Her and Cheng Shin

-0.08

Correlation Coefficient

Chia Her  Cheng Shin

Good diversification

The 3 months correlation between Chia and Cheng is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chia Her Industrial and Cheng Shin Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Shin Rubber and Chia Her 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 Her Industrial are associated (or correlated) with Cheng Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Shin Rubber has no effect on the direction of Chia Her i.e., Chia Her and Cheng Shin go up and down completely randomly.

Pair Corralation between Chia Her and Cheng Shin

Assuming the 90 days trading horizon Chia Her Industrial is expected to generate 1.61 times more return on investment than Cheng Shin. However, Chia Her is 1.61 times more volatile than Cheng Shin Rubber. It trades about 0.15 of its potential returns per unit of risk. Cheng Shin Rubber is currently generating about 0.04 per unit of risk. If you would invest  1,885  in Chia Her Industrial on September 5, 2024 and sell it today you would earn a total of  650.00  from holding Chia Her Industrial or generate 34.48% return on investment over 90 days.

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

Chia Her Industrial  vs.  Cheng Shin Rubber

Chia Her Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Her Industrial are ranked lower than 11 (%) 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.

Cheng Shin Rubber

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Shin Rubber are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Cheng Shin 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 Her and Cheng Shin

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

The idea behind Chia Her Industrial and Cheng Shin Rubber 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.