Correlation Between Chang Type and Chung Lien

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

By analyzing existing cross correlation between Chang Type Industrial and Chung Lien Transportation, you can compare the effects of market volatilities on Chang Type and Chung Lien 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 Chang Type with a short position of Chung Lien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chang Type and Chung Lien.

Diversification Opportunities for Chang Type and Chung Lien

0.62

Correlation Coefficient

Chang Type  Chung Lien

Poor diversification

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

Pair Corralation between Chang Type and Chung Lien

Assuming the 90 days trading horizon Chang Type Industrial is expected to under-perform the Chung Lien. In addition to that, Chang Type is 2.16 times more volatile than Chung Lien Transportation. It trades about -0.29 of its total potential returns per unit of risk. Chung Lien Transportation is currently generating about -0.08 per unit of volatility. If you would invest  4,300  in Chung Lien Transportation on September 27, 2024 and sell it today you would lose (115.00) from holding Chung Lien Transportation or give up 2.67% of portfolio value over 90 days.

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

Chang Type Industrial  vs.  Chung Lien Transportation

Chang Type Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chang Type Industrial 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.

Chung Lien Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Lien Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Lien 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 Chang Type and Chung Lien

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

The idea behind Chang Type Industrial and Chung Lien Transportation 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.