Correlation Between Shin Tai and Hsin Ba

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

Diversification Opportunities for Shin Tai and Hsin Ba

0.08

Correlation Coefficient

Shin Tai  Hsin Ba

Significant diversification

The 3 months correlation between Shin and Hsin is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Shin Tai Industry and Hsin Ba Ba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Ba Ba 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 Hsin Ba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Ba Ba has no effect on the direction of Shin Tai i.e., Shin Tai and Hsin Ba go up and down completely randomly.

Pair Corralation between Shin Tai and Hsin Ba

Assuming the 90 days trading horizon Shin Tai Industry is expected to generate 1.52 times more return on investment than Hsin Ba. However, Shin Tai is 1.52 times more volatile than Hsin Ba Ba. It trades about 0.17 of its potential returns per unit of risk. Hsin Ba Ba is currently generating about -0.08 per unit of risk. If you would invest  7,610  in Shin Tai Industry on December 29, 2024 and sell it today you would earn a total of  2,490  from holding Shin Tai Industry or generate 32.72% return on investment over 90 days.

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

Shin Tai Industry  vs.  Hsin Ba Ba

Shin Tai Industry

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Tai Industry are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shin Tai showed solid returns over the last few months and may actually be approaching a breakup point.

Hsin Ba Ba

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hsin Ba Ba has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Shin Tai and Hsin Ba

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

The idea behind Shin Tai Industry and Hsin Ba Ba 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.