Correlation Between Tah Hsin and Shinkong Textile

Can any of the company-specific risk be diversified away by investing in both Tah Hsin and Shinkong Textile 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 Tah Hsin and Shinkong Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tah Hsin Industrial and Shinkong Textile Co, you can compare the effects of market volatilities on Tah Hsin and Shinkong Textile 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 Tah Hsin with a short position of Shinkong Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tah Hsin and Shinkong Textile.

Diversification Opportunities for Tah Hsin and Shinkong Textile

0.69

Correlation Coefficient

Tah Hsin  Shinkong Textile

Poor diversification

The 3 months correlation between Tah and Shinkong is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tah Hsin Industrial and Shinkong Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Textile and Tah Hsin 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 Tah Hsin Industrial are associated (or correlated) with Shinkong Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Textile has no effect on the direction of Tah Hsin i.e., Tah Hsin and Shinkong Textile go up and down completely randomly.

Pair Corralation between Tah Hsin and Shinkong Textile

Assuming the 90 days trading horizon Tah Hsin Industrial is expected to generate 0.31 times more return on investment than Shinkong Textile. However, Tah Hsin Industrial is 3.22 times less risky than Shinkong Textile. It trades about -0.05 of its potential returns per unit of risk. Shinkong Textile Co is currently generating about -0.08 per unit of risk. If you would invest  7,060  in Tah Hsin Industrial on September 25, 2024 and sell it today you would lose (60.00) from holding Tah Hsin Industrial or give up 0.85% of portfolio value over 90 days.

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

Tah Hsin Industrial  vs.  Shinkong Textile Co

Tah Hsin Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shinkong Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinkong Textile Co 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 Tah Hsin and Shinkong Textile

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

The idea behind Tah Hsin Industrial and Shinkong Textile 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.