Correlation Between Chung Hsin and UPC Technology

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

By analyzing existing cross correlation between Chung Hsin Electric Machinery and UPC Technology Corp, you can compare the effects of market volatilities on Chung Hsin and UPC Technology 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 Hsin with a short position of UPC Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and UPC Technology.

Diversification Opportunities for Chung Hsin and UPC Technology

0.63

Correlation Coefficient

Chung Hsin  UPC Technology

Poor diversification

The 3 months correlation between Chung and UPC is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and UPC Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPC Technology Corp and Chung 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 Chung Hsin Electric Machinery are associated (or correlated) with UPC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPC Technology Corp has no effect on the direction of Chung Hsin i.e., Chung Hsin and UPC Technology go up and down completely randomly.

Pair Corralation between Chung Hsin and UPC Technology

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to generate 1.05 times more return on investment than UPC Technology. However, Chung Hsin is 1.05 times more volatile than UPC Technology Corp. It trades about -0.06 of its potential returns per unit of risk. UPC Technology Corp is currently generating about -0.07 per unit of risk. If you would invest  17,200  in Chung Hsin Electric Machinery on September 2, 2024 and sell it today you would lose (1,400) from holding Chung Hsin Electric Machinery or give up 8.14% of portfolio value over 90 days.

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

Chung Hsin Electric Machinery  vs.  UPC Technology Corp

Chung Hsin Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hsin Electric Machinery 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.

UPC Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UPC Technology Corp 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 Chung Hsin and UPC Technology

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

The idea behind Chung Hsin Electric Machinery and UPC Technology Corp 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.