Correlation Between Shinil Electronics and ABCO Electronics

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

By analyzing existing cross correlation between Shinil Electronics Co and ABCO Electronics Co, you can compare the effects of market volatilities on Shinil Electronics and ABCO Electronics 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 Shinil Electronics with a short position of ABCO Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinil Electronics and ABCO Electronics.

Diversification Opportunities for Shinil Electronics and ABCO Electronics

0.6

Correlation Coefficient

Shinil Electronics  ABCO Electronics

Poor diversification

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

Pair Corralation between Shinil Electronics and ABCO Electronics

Assuming the 90 days trading horizon Shinil Electronics Co is expected to generate 0.43 times more return on investment than ABCO Electronics. However, Shinil Electronics Co is 2.33 times less risky than ABCO Electronics. It trades about -0.08 of its potential returns per unit of risk. ABCO Electronics Co is currently generating about -0.14 per unit of risk. If you would invest  174,000  in Shinil Electronics Co on October 9, 2024 and sell it today you would lose (31,600) from holding Shinil Electronics Co or give up 18.16% of portfolio value over 90 days.

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

Shinil Electronics Co  vs.  ABCO Electronics Co

Shinil Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinil Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinil Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ABCO Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABCO Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shinil Electronics and ABCO Electronics

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

The idea behind Shinil Electronics Co and ABCO Electronics Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.