Correlation Between Shin Tai and Wistron Information

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

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

Diversification Opportunities for Shin Tai and Wistron Information

-0.36

Correlation Coefficient

Shin Tai  Wistron Information

Very good diversification

The 3 months correlation between Shin and Wistron is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shin Tai Industry and Wistron Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Information and Shin Tai 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 Shin Tai Industry are associated (or correlated) with Wistron Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Information has no effect on the direction of Shin Tai i.e., Shin Tai and Wistron Information go up and down completely randomly.

Pair Corralation between Shin Tai and Wistron Information

Assuming the 90 days trading horizon Shin Tai Industry is expected to under-perform the Wistron Information. But the stock apears to be less risky and, when comparing its historical volatility, Shin Tai Industry is 1.07 times less risky than Wistron Information. The stock trades about -0.75 of its potential returns per unit of risk. The Wistron Information Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11,300  in Wistron Information Technology on October 5, 2024 and sell it today you would earn a total of  50.00  from holding Wistron Information Technology or generate 0.44% return on investment over 90 days.

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

Shin Tai Industry  vs.  Wistron Information Technology

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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Wistron Information

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Wistron Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wistron Information 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 Shin Tai and Wistron Information

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

The idea behind Shin Tai Industry and Wistron Information Technology 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..