Correlation Between XAC Automation and Cheng Fwa

Can any of the company-specific risk be diversified away by investing in both XAC Automation and Cheng Fwa 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 XAC Automation and Cheng Fwa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XAC Automation and Cheng Fwa Industrial, you can compare the effects of market volatilities on XAC Automation and Cheng Fwa 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 XAC Automation with a short position of Cheng Fwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of XAC Automation and Cheng Fwa.

Diversification Opportunities for XAC Automation and Cheng Fwa

0.6

Correlation Coefficient

XAC Automation  Cheng Fwa

Poor diversification

The 3 months correlation between XAC and Cheng is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding XAC Automation and Cheng Fwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Fwa Industrial and XAC Automation 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 XAC Automation are associated (or correlated) with Cheng Fwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Fwa Industrial has no effect on the direction of XAC Automation i.e., XAC Automation and Cheng Fwa go up and down completely randomly.

Pair Corralation between XAC Automation and Cheng Fwa

Assuming the 90 days trading horizon XAC Automation is expected to under-perform the Cheng Fwa. But the stock apears to be less risky and, when comparing its historical volatility, XAC Automation is 1.99 times less risky than Cheng Fwa. The stock trades about -0.03 of its potential returns per unit of risk. The Cheng Fwa Industrial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,710  in Cheng Fwa Industrial on September 14, 2024 and sell it today you would earn a total of  610.00  from holding Cheng Fwa Industrial or generate 22.51% return on investment over 90 days.

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

XAC Automation  vs.  Cheng Fwa Industrial

XAC Automation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XAC Automation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, XAC Automation is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cheng Fwa Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Fwa Industrial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cheng Fwa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XAC Automation and Cheng Fwa

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

The idea behind XAC Automation and Cheng Fwa Industrial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.