Correlation Between Yi Jinn and Chi Hua

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

By analyzing existing cross correlation between Yi Jinn Industrial and Chi Hua Fitness, you can compare the effects of market volatilities on Yi Jinn and Chi Hua 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 Yi Jinn with a short position of Chi Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yi Jinn and Chi Hua.

Diversification Opportunities for Yi Jinn and Chi Hua

0.51

Correlation Coefficient

Yi Jinn  Chi Hua

Very weak diversification

The 3 months correlation between 1457 and Chi is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Yi Jinn Industrial and Chi Hua Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Hua Fitness and Yi Jinn 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 Yi Jinn Industrial are associated (or correlated) with Chi Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Hua Fitness has no effect on the direction of Yi Jinn i.e., Yi Jinn and Chi Hua go up and down completely randomly.

Pair Corralation between Yi Jinn and Chi Hua

Assuming the 90 days trading horizon Yi Jinn Industrial is expected to under-perform the Chi Hua. But the stock apears to be less risky and, when comparing its historical volatility, Yi Jinn Industrial is 1.16 times less risky than Chi Hua. The stock trades about -0.06 of its potential returns per unit of risk. The Chi Hua Fitness is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,225  in Chi Hua Fitness on September 15, 2024 and sell it today you would lose (460.00) from holding Chi Hua Fitness or give up 10.89% of portfolio value over 90 days.

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

Yi Jinn Industrial  vs.  Chi Hua Fitness

Yi Jinn Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yi Jinn Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Yi Jinn is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chi Hua Fitness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chi Hua Fitness 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 Yi Jinn and Chi Hua

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

The idea behind Yi Jinn Industrial and Chi Hua Fitness 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.