Correlation Between Hanshin Construction and Shinil Electronics

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

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

Diversification Opportunities for Hanshin Construction and Shinil Electronics

0.51

Correlation Coefficient

Hanshin Construction  Shinil Electronics

Very weak diversification

The 3 months correlation between Hanshin and Shinil is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hanshin Construction Co and Shinil Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinil Electronics and Hanshin Construction 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 Hanshin Construction Co are associated (or correlated) with Shinil Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinil Electronics has no effect on the direction of Hanshin Construction i.e., Hanshin Construction and Shinil Electronics go up and down completely randomly.

Pair Corralation between Hanshin Construction and Shinil Electronics

Assuming the 90 days trading horizon Hanshin Construction is expected to generate 1.04 times less return on investment than Shinil Electronics. In addition to that, Hanshin Construction is 1.14 times more volatile than Shinil Electronics Co. It trades about 0.22 of its total potential returns per unit of risk. Shinil Electronics Co is currently generating about 0.26 per unit of volatility. If you would invest  130,700  in Shinil Electronics Co on October 10, 2024 and sell it today you would earn a total of  11,700  from holding Shinil Electronics Co or generate 8.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Hanshin Construction Co  vs.  Shinil Electronics Co

Hanshin Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Hanshin Construction and Shinil Electronics

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

The idea behind Hanshin Construction Co and Shinil 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.