Correlation Between Formetal and Shinil Industrial

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

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

Diversification Opportunities for Formetal and Shinil Industrial

-0.21

Correlation Coefficient

Formetal  Shinil Industrial

Very good diversification

The 3 months correlation between Formetal and Shinil is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Shinil Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinil Industrial and Formetal 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 Formetal Co are associated (or correlated) with Shinil Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinil Industrial has no effect on the direction of Formetal i.e., Formetal and Shinil Industrial go up and down completely randomly.

Pair Corralation between Formetal and Shinil Industrial

Assuming the 90 days trading horizon Formetal Co is expected to generate 2.63 times more return on investment than Shinil Industrial. However, Formetal is 2.63 times more volatile than Shinil Industrial Co. It trades about 0.12 of its potential returns per unit of risk. Shinil Industrial Co is currently generating about -0.05 per unit of risk. If you would invest  278,358  in Formetal Co on October 8, 2024 and sell it today you would earn a total of  75,142  from holding Formetal Co or generate 26.99% return on investment over 90 days.

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

Formetal Co  vs.  Shinil Industrial Co

Formetal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal sustained solid returns over the last few months and may actually be approaching a breakup point.

Shinil Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Formetal and Shinil Industrial

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

The idea behind Formetal Co and Shinil Industrial 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .