Correlation Between Great Wall and Shin Shin

Can any of the company-specific risk be diversified away by investing in both Great Wall and Shin Shin 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 Shin 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 Shin Co, you can compare the effects of market volatilities on Great Wall and Shin Shin 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 Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Shin Shin.

Diversification Opportunities for Great Wall and Shin Shin

0.22

Correlation Coefficient

Great Wall  Shin Shin

Modest diversification

The 3 months correlation between Great and Shin is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Shin Shin Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Shin 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 Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Shin has no effect on the direction of Great Wall i.e., Great Wall and Shin Shin go up and down completely randomly.

Pair Corralation between Great Wall and Shin Shin

Assuming the 90 days trading horizon Great Wall Enterprise is expected to generate 1.4 times more return on investment than Shin Shin. However, Great Wall is 1.4 times more volatile than Shin Shin Co. It trades about 0.08 of its potential returns per unit of risk. Shin Shin Co is currently generating about 0.1 per unit of risk. If you would invest  5,110  in Great Wall Enterprise on October 20, 2024 and sell it today you would earn a total of  100.00  from holding Great Wall Enterprise or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Great Wall Enterprise  vs.  Shin Shin Co

Great Wall Enterprise

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Enterprise are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Great Wall is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Shin Shin

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Great Wall and Shin Shin

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

The idea behind Great Wall Enterprise and Shin Shin 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.

Check out your portfolio center.

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.