Correlation Between Chia Yi and Chung Fu

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

By analyzing existing cross correlation between Chia Yi Steel and Chung Fu Tex International, you can compare the effects of market volatilities on Chia Yi and Chung Fu 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 Yi with a short position of Chung Fu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Yi and Chung Fu.

Diversification Opportunities for Chia Yi and Chung Fu

-0.46

Correlation Coefficient

Chia Yi  Chung Fu

Very good diversification

The 3 months correlation between Chia and Chung is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chia Yi Steel and Chung Fu Tex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Fu Tex and Chia Yi 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 Yi Steel are associated (or correlated) with Chung Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Fu Tex has no effect on the direction of Chia Yi i.e., Chia Yi and Chung Fu go up and down completely randomly.

Pair Corralation between Chia Yi and Chung Fu

Assuming the 90 days trading horizon Chia Yi Steel is expected to generate 1.49 times more return on investment than Chung Fu. However, Chia Yi is 1.49 times more volatile than Chung Fu Tex International. It trades about 0.04 of its potential returns per unit of risk. Chung Fu Tex International is currently generating about -0.03 per unit of risk. If you would invest  1,040  in Chia Yi Steel on September 14, 2024 and sell it today you would earn a total of  65.00  from holding Chia Yi Steel or generate 6.25% return on investment over 90 days.

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

Chia Yi Steel  vs.  Chung Fu Tex International

Chia Yi Steel

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Yi Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chia Yi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chung Fu Tex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Fu Tex International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Fu 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 Yi and Chung Fu

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

The idea behind Chia Yi Steel and Chung Fu Tex International 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.