Correlation Between Great Wall and Shin Tai

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

By analyzing existing cross correlation between Great Wall Enterprise and Shin Tai Industry, you can compare the effects of market volatilities on Great Wall and Shin Tai 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 Great Wall with a short position of Shin Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Shin Tai.

Diversification Opportunities for Great Wall and Shin Tai

-0.47

Correlation Coefficient

Great Wall  Shin Tai

Very good diversification

The 3 months correlation between Great and Shin is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Shin Tai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Tai Industry and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Shin Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Tai Industry has no effect on the direction of Great Wall i.e., Great Wall and Shin Tai go up and down completely randomly.

Pair Corralation between Great Wall and Shin Tai

Assuming the 90 days trading horizon Great Wall is expected to generate 3.5 times less return on investment than Shin Tai. But when comparing it to its historical volatility, Great Wall Enterprise is 1.56 times less risky than Shin Tai. It trades about 0.03 of its potential returns per unit of risk. Shin Tai Industry is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,890  in Shin Tai Industry on September 20, 2024 and sell it today you would earn a total of  4,010  from holding Shin Tai Industry or generate 58.2% return on investment over 90 days.

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

Great Wall Enterprise  vs.  Shin Tai Industry

Great Wall Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Wall Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Great Wall is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Shin Tai Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Tai Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Great Wall and Shin Tai

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

The idea behind Great Wall Enterprise and Shin Tai Industry 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.