Correlation Between Tong Hwa and Shinkong Synthetic

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

By analyzing existing cross correlation between Tong Hwa Synthetic Fiber and Shinkong Synthetic Fiber, you can compare the effects of market volatilities on Tong Hwa and Shinkong Synthetic 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 Tong Hwa with a short position of Shinkong Synthetic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hwa and Shinkong Synthetic.

Diversification Opportunities for Tong Hwa and Shinkong Synthetic

0.47

Correlation Coefficient

Tong Hwa  Shinkong Synthetic

Very weak diversification

The 3 months correlation between Tong and Shinkong is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hwa Synthetic Fiber and Shinkong Synthetic Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Synthetic Fiber and Tong Hwa 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 Tong Hwa Synthetic Fiber are associated (or correlated) with Shinkong Synthetic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Synthetic Fiber has no effect on the direction of Tong Hwa i.e., Tong Hwa and Shinkong Synthetic go up and down completely randomly.

Pair Corralation between Tong Hwa and Shinkong Synthetic

Assuming the 90 days trading horizon Tong Hwa Synthetic Fiber is expected to generate 2.05 times more return on investment than Shinkong Synthetic. However, Tong Hwa is 2.05 times more volatile than Shinkong Synthetic Fiber. It trades about 0.07 of its potential returns per unit of risk. Shinkong Synthetic Fiber is currently generating about -0.03 per unit of risk. If you would invest  1,405  in Tong Hwa Synthetic Fiber on October 3, 2024 and sell it today you would earn a total of  1,425  from holding Tong Hwa Synthetic Fiber or generate 101.42% return on investment over 90 days.

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

Tong Hwa Synthetic Fiber  vs.  Shinkong Synthetic Fiber

Tong Hwa Synthetic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tong Hwa Synthetic Fiber 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.

Shinkong Synthetic Fiber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinkong Synthetic Fiber 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 Tong Hwa and Shinkong Synthetic

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

The idea behind Tong Hwa Synthetic Fiber and Shinkong Synthetic Fiber 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.