Correlation Between Shihlin Electric and Hiwin Technologies

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

Diversification Opportunities for Shihlin Electric and Hiwin Technologies

-0.46

Correlation Coefficient

Shihlin Electric  Hiwin Technologies

Very good diversification

The 3 months correlation between Shihlin and Hiwin is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shihlin Electric Engineering and Hiwin Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiwin Technologies Corp 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 Hiwin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiwin Technologies Corp has no effect on the direction of Shihlin Electric i.e., Shihlin Electric and Hiwin Technologies go up and down completely randomly.

Pair Corralation between Shihlin Electric and Hiwin Technologies

Assuming the 90 days trading horizon Shihlin Electric Engineering is expected to generate 1.56 times more return on investment than Hiwin Technologies. However, Shihlin Electric is 1.56 times more volatile than Hiwin Technologies Corp. It trades about 0.09 of its potential returns per unit of risk. Hiwin Technologies Corp is currently generating about 0.04 per unit of risk. If you would invest  5,940  in Shihlin Electric Engineering on September 15, 2024 and sell it today you would earn a total of  13,210  from holding Shihlin Electric Engineering or generate 222.39% return on investment over 90 days.

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

Shihlin Electric Engineering  vs.  Hiwin Technologies Corp

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.

Hiwin Technologies Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hiwin Technologies Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hiwin Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shihlin Electric and Hiwin Technologies

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

The idea behind Shihlin Electric Engineering and Hiwin Technologies Corp 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.