Correlation Between San Fu and Chi Sheng

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

By analyzing existing cross correlation between San Fu Chemical and Chi Sheng Chemical, you can compare the effects of market volatilities on San Fu and Chi Sheng 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 San Fu with a short position of Chi Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Fu and Chi Sheng.

Diversification Opportunities for San Fu and Chi Sheng

0.29

Correlation Coefficient

San Fu  Chi Sheng

Modest diversification

The 3 months correlation between San and Chi is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding San Fu Chemical and Chi Sheng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Sheng Chemical and San Fu 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 San Fu Chemical are associated (or correlated) with Chi Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Sheng Chemical has no effect on the direction of San Fu i.e., San Fu and Chi Sheng go up and down completely randomly.

Pair Corralation between San Fu and Chi Sheng

Assuming the 90 days trading horizon San Fu Chemical is expected to generate 3.19 times more return on investment than Chi Sheng. However, San Fu is 3.19 times more volatile than Chi Sheng Chemical. It trades about 0.18 of its potential returns per unit of risk. Chi Sheng Chemical is currently generating about 0.37 per unit of risk. If you would invest  12,300  in San Fu Chemical on September 13, 2024 and sell it today you would earn a total of  1,550  from holding San Fu Chemical or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

San Fu Chemical  vs.  Chi Sheng Chemical

San Fu Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

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

Chi Sheng Chemical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Sheng Chemical are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chi Sheng may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with San Fu and Chi Sheng

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

The idea behind San Fu Chemical and Chi Sheng Chemical 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 Stocks Directory module to find actively traded stocks across global markets.