Correlation Between Shihlin Electric and Fortune Electric

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

By analyzing existing cross correlation between Shihlin Electric Engineering and Fortune Electric Co, you can compare the effects of market volatilities on Shihlin Electric and Fortune Electric 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 Shihlin Electric with a short position of Fortune Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shihlin Electric and Fortune Electric.

Diversification Opportunities for Shihlin Electric and Fortune Electric

0.84

Correlation Coefficient

Shihlin Electric  Fortune Electric

Very poor diversification

The 3 months correlation between Shihlin and Fortune is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Shihlin Electric Engineering and Fortune Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Electric and Shihlin Electric 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 Shihlin Electric Engineering are associated (or correlated) with Fortune Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Electric has no effect on the direction of Shihlin Electric i.e., Shihlin Electric and Fortune Electric go up and down completely randomly.

Pair Corralation between Shihlin Electric and Fortune Electric

Assuming the 90 days trading horizon Shihlin Electric Engineering is expected to under-perform the Fortune Electric. But the stock apears to be less risky and, when comparing its historical volatility, Shihlin Electric Engineering is 1.6 times less risky than Fortune Electric. The stock trades about -0.07 of its potential returns per unit of risk. The Fortune Electric Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  57,700  in Fortune Electric Co on September 16, 2024 and sell it today you would lose (4,800) from holding Fortune Electric Co or give up 8.32% of portfolio value over 90 days.

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

Shihlin Electric Engineering  vs.  Fortune Electric Co

Shihlin Electric Eng

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shihlin Electric Engineering 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.

Fortune Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortune Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fortune Electric 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 Shihlin Electric and Fortune Electric

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

The idea behind Shihlin Electric Engineering and Fortune Electric 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.