Correlation Between Shin Tai and Ching Feng

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

Diversification Opportunities for Shin Tai and Ching Feng

0.85

Correlation Coefficient

Shin Tai  Ching Feng

Very poor diversification

The 3 months correlation between Shin and Ching is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shin Tai Industry and Ching Feng Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ching Feng Home 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 Ching Feng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ching Feng Home has no effect on the direction of Shin Tai i.e., Shin Tai and Ching Feng go up and down completely randomly.

Pair Corralation between Shin Tai and Ching Feng

Assuming the 90 days trading horizon Shin Tai Industry is expected to under-perform the Ching Feng. In addition to that, Shin Tai is 2.89 times more volatile than Ching Feng Home. It trades about -0.33 of its total potential returns per unit of risk. Ching Feng Home is currently generating about 0.19 per unit of volatility. If you would invest  2,890  in Ching Feng Home on October 20, 2024 and sell it today you would earn a total of  155.00  from holding Ching Feng Home or generate 5.36% return on investment over 90 days.

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

Shin Tai Industry  vs.  Ching Feng Home

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.

Ching Feng Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ching Feng Home 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 Ching Feng

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

The idea behind Shin Tai Industry and Ching Feng Home 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.