Correlation Between Advanced Energy and Chi Hua

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

By analyzing existing cross correlation between Advanced Energy Solution and Chi Hua Fitness, you can compare the effects of market volatilities on Advanced Energy and Chi Hua 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 Advanced Energy with a short position of Chi Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Chi Hua.

Diversification Opportunities for Advanced Energy and Chi Hua

-0.65

Correlation Coefficient

Advanced Energy  Chi Hua

Excellent diversification

The 3 months correlation between Advanced and Chi is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Solution and Chi Hua Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Hua Fitness and Advanced Energy 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 Advanced Energy Solution are associated (or correlated) with Chi Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Hua Fitness has no effect on the direction of Advanced Energy i.e., Advanced Energy and Chi Hua go up and down completely randomly.

Pair Corralation between Advanced Energy and Chi Hua

Assuming the 90 days trading horizon Advanced Energy Solution is expected to generate 3.59 times more return on investment than Chi Hua. However, Advanced Energy is 3.59 times more volatile than Chi Hua Fitness. It trades about 0.19 of its potential returns per unit of risk. Chi Hua Fitness is currently generating about -0.13 per unit of risk. If you would invest  85,000  in Advanced Energy Solution on September 23, 2024 and sell it today you would earn a total of  12,900  from holding Advanced Energy Solution or generate 15.18% return on investment over 90 days.

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

Advanced Energy Solution  vs.  Chi Hua Fitness

Advanced Energy Solution

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Solution are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Chi Hua Fitness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chi Hua Fitness 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 Advanced Energy and Chi Hua

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

The idea behind Advanced Energy Solution and Chi Hua Fitness 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.