Correlation Between Hong Ho and Shieh Yih

Can any of the company-specific risk be diversified away by investing in both Hong Ho and Shieh Yih 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 Hong Ho and Shieh Yih into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Ho Precision and Shieh Yih Machinery, you can compare the effects of market volatilities on Hong Ho and Shieh Yih 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 Hong Ho with a short position of Shieh Yih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Ho and Shieh Yih.

Diversification Opportunities for Hong Ho and Shieh Yih

-0.74

Correlation Coefficient

Hong Ho  Shieh Yih

Pay attention - limited upside

The 3 months correlation between Hong and Shieh is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hong Ho Precision and Shieh Yih Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shieh Yih Machinery and Hong Ho 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 Hong Ho Precision are associated (or correlated) with Shieh Yih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shieh Yih Machinery has no effect on the direction of Hong Ho i.e., Hong Ho and Shieh Yih go up and down completely randomly.

Pair Corralation between Hong Ho and Shieh Yih

Assuming the 90 days trading horizon Hong Ho is expected to generate 3.23 times less return on investment than Shieh Yih. But when comparing it to its historical volatility, Hong Ho Precision is 1.17 times less risky than Shieh Yih. It trades about 0.02 of its potential returns per unit of risk. Shieh Yih Machinery is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,628  in Shieh Yih Machinery on September 23, 2024 and sell it today you would earn a total of  1,272  from holding Shieh Yih Machinery or generate 48.4% return on investment over 90 days.

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

Hong Ho Precision  vs.  Shieh Yih Machinery

Hong Ho Precision

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shieh Yih Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shieh Yih Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shieh Yih 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 Hong Ho and Shieh Yih

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

The idea behind Hong Ho Precision and Shieh Yih Machinery 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.