Correlation Between Shihlin Electric and Kung Long

Can any of the company-specific risk be diversified away by investing in both Shihlin Electric and Kung Long 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 Kung Long 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 Kung Long Batteries, you can compare the effects of market volatilities on Shihlin Electric and Kung Long 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 Kung Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shihlin Electric and Kung Long.

Diversification Opportunities for Shihlin Electric and Kung Long

-0.27

Correlation Coefficient

Shihlin Electric  Kung Long

Very good diversification

The 3 months correlation between Shihlin and Kung is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shihlin Electric Engineering and Kung Long Batteries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kung Long Batteries 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 Kung Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kung Long Batteries has no effect on the direction of Shihlin Electric i.e., Shihlin Electric and Kung Long go up and down completely randomly.

Pair Corralation between Shihlin Electric and Kung Long

Assuming the 90 days trading horizon Shihlin Electric Engineering is expected to under-perform the Kung Long. In addition to that, Shihlin Electric is 1.31 times more volatile than Kung Long Batteries. It trades about -0.07 of its total potential returns per unit of risk. Kung Long Batteries is currently generating about 0.03 per unit of volatility. If you would invest  15,600  in Kung Long Batteries on September 15, 2024 and sell it today you would earn a total of  300.00  from holding Kung Long Batteries or generate 1.92% return on investment over 90 days.

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

Shihlin Electric Engineering  vs.  Kung Long Batteries

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.

Kung Long Batteries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kung Long Batteries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kung Long 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 Kung Long

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

The idea behind Shihlin Electric Engineering and Kung Long Batteries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.