Correlation Between Zeng Hsing and Shinkong Insurance

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

By analyzing existing cross correlation between Zeng Hsing Industrial and Shinkong Insurance Co, you can compare the effects of market volatilities on Zeng Hsing and Shinkong Insurance 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 Zeng Hsing with a short position of Shinkong Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zeng Hsing and Shinkong Insurance.

Diversification Opportunities for Zeng Hsing and Shinkong Insurance

-0.85

Correlation Coefficient

Zeng Hsing  Shinkong Insurance

Pay attention - limited upside

The 3 months correlation between Zeng and Shinkong is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Zeng Hsing Industrial and Shinkong Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Insurance and Zeng Hsing 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 Zeng Hsing Industrial are associated (or correlated) with Shinkong Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Insurance has no effect on the direction of Zeng Hsing i.e., Zeng Hsing and Shinkong Insurance go up and down completely randomly.

Pair Corralation between Zeng Hsing and Shinkong Insurance

Assuming the 90 days trading horizon Zeng Hsing Industrial is expected to under-perform the Shinkong Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Zeng Hsing Industrial is 1.33 times less risky than Shinkong Insurance. The stock trades about -0.02 of its potential returns per unit of risk. The Shinkong Insurance Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,845  in Shinkong Insurance Co on September 15, 2024 and sell it today you would earn a total of  5,455  from holding Shinkong Insurance Co or generate 112.59% return on investment over 90 days.

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

Zeng Hsing Industrial  vs.  Shinkong Insurance Co

Zeng Hsing Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zeng Hsing Industrial 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.

Shinkong Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shinkong Insurance Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shinkong Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zeng Hsing and Shinkong Insurance

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

The idea behind Zeng Hsing Industrial and Shinkong Insurance 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.