Correlation Between Chain Chon and Tung Ho

Can any of the company-specific risk be diversified away by investing in both Chain Chon and Tung Ho 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 Chain Chon and Tung Ho into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chain Chon Industrial and Tung Ho Steel, you can compare the effects of market volatilities on Chain Chon and Tung Ho 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 Chain Chon with a short position of Tung Ho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chain Chon and Tung Ho.

Diversification Opportunities for Chain Chon and Tung Ho

0.23

Correlation Coefficient

Chain Chon  Tung Ho

Modest diversification

The 3 months correlation between Chain and Tung is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Chain Chon Industrial and Tung Ho Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Steel and Chain Chon 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 Chain Chon Industrial are associated (or correlated) with Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Steel has no effect on the direction of Chain Chon i.e., Chain Chon and Tung Ho go up and down completely randomly.

Pair Corralation between Chain Chon and Tung Ho

Assuming the 90 days trading horizon Chain Chon Industrial is expected to under-perform the Tung Ho. In addition to that, Chain Chon is 2.36 times more volatile than Tung Ho Steel. It trades about -0.29 of its total potential returns per unit of risk. Tung Ho Steel is currently generating about -0.12 per unit of volatility. If you would invest  7,430  in Tung Ho Steel on August 30, 2024 and sell it today you would lose (250.00) from holding Tung Ho Steel or give up 3.36% of portfolio value over 90 days.

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

Chain Chon Industrial  vs.  Tung Ho Steel

Chain Chon Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chain Chon Industrial 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.

Tung Ho Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tung Ho Steel 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 Chain Chon and Tung Ho

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

The idea behind Chain Chon Industrial and Tung Ho Steel 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..