Correlation Between Chung Hwa and WinMate Communication

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

By analyzing existing cross correlation between Chung Hwa Chemical and WinMate Communication INC, you can compare the effects of market volatilities on Chung Hwa and WinMate Communication 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 Hwa with a short position of WinMate Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and WinMate Communication.

Diversification Opportunities for Chung Hwa and WinMate Communication

-0.63

Correlation Coefficient

Chung Hwa  WinMate Communication

Excellent diversification

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

Pair Corralation between Chung Hwa and WinMate Communication

Assuming the 90 days trading horizon Chung Hwa Chemical is expected to under-perform the WinMate Communication. In addition to that, Chung Hwa is 1.95 times more volatile than WinMate Communication INC. It trades about -0.1 of its total potential returns per unit of risk. WinMate Communication INC is currently generating about 0.08 per unit of volatility. If you would invest  14,250  in WinMate Communication INC on September 16, 2024 and sell it today you would earn a total of  1,000.00  from holding WinMate Communication INC or generate 7.02% return on investment over 90 days.

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

Chung Hwa Chemical  vs.  WinMate Communication INC

Chung Hwa Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hwa Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

WinMate Communication INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WinMate Communication INC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, WinMate Communication may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chung Hwa and WinMate Communication

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

The idea behind Chung Hwa Chemical and WinMate Communication INC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.