Correlation Between Chung Hsin and Leatec Fine

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

By analyzing existing cross correlation between Chung Hsin Electric Machinery and Leatec Fine Ceramics, you can compare the effects of market volatilities on Chung Hsin and Leatec Fine 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 Chung Hsin with a short position of Leatec Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and Leatec Fine.

Diversification Opportunities for Chung Hsin and Leatec Fine

0.71

Correlation Coefficient

Chung Hsin  Leatec Fine

Poor diversification

The 3 months correlation between Chung and Leatec is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Leatec Fine Ceramics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatec Fine Ceramics and Chung Hsin 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 Chung Hsin Electric Machinery are associated (or correlated) with Leatec Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatec Fine Ceramics has no effect on the direction of Chung Hsin i.e., Chung Hsin and Leatec Fine go up and down completely randomly.

Pair Corralation between Chung Hsin and Leatec Fine

Assuming the 90 days trading horizon Chung Hsin is expected to generate 1.01 times less return on investment than Leatec Fine. But when comparing it to its historical volatility, Chung Hsin Electric Machinery is 1.72 times less risky than Leatec Fine. It trades about 0.27 of its potential returns per unit of risk. Leatec Fine Ceramics is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,665  in Leatec Fine Ceramics on April 23, 2025 and sell it today you would earn a total of  455.00  from holding Leatec Fine Ceramics or generate 27.33% return on investment over 90 days.

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

Chung Hsin Electric Machinery  vs.  Leatec Fine Ceramics

Chung Hsin Electric

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Hsin Electric Machinery are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chung Hsin showed solid returns over the last few months and may actually be approaching a breakup point.

Leatec Fine Ceramics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leatec Fine Ceramics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Leatec Fine showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chung Hsin and Leatec Fine

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

The idea behind Chung Hsin Electric Machinery and Leatec Fine Ceramics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.