Correlation Between Solar Applied and Shinkong Insurance

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

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

Diversification Opportunities for Solar Applied and Shinkong Insurance

-0.13

Correlation Coefficient

Solar Applied  Shinkong Insurance

Good diversification

The 3 months correlation between Solar and Shinkong is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Solar Applied Materials and Shinkong Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Insurance and Solar Applied 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 Solar Applied Materials 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 Solar Applied i.e., Solar Applied and Shinkong Insurance go up and down completely randomly.

Pair Corralation between Solar Applied and Shinkong Insurance

Assuming the 90 days trading horizon Solar Applied Materials is expected to generate 1.66 times more return on investment than Shinkong Insurance. However, Solar Applied is 1.66 times more volatile than Shinkong Insurance Co. It trades about 0.07 of its potential returns per unit of risk. Shinkong Insurance Co is currently generating about 0.12 per unit of risk. If you would invest  3,636  in Solar Applied Materials on September 14, 2024 and sell it today you would earn a total of  3,024  from holding Solar Applied Materials or generate 83.17% return on investment over 90 days.

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

Solar Applied Materials  vs.  Shinkong Insurance Co

Solar Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Solar Applied and Shinkong Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solar Applied 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 Solar Applied Materials 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.