Correlation Between Shin Heung and APro

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

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

Diversification Opportunities for Shin Heung and APro

0.87

Correlation Coefficient

Shin Heung  APro

Very poor diversification

The 3 months correlation between Shin and APro is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shin Heung Energy and APro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APro and Shin Heung 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 Shin Heung Energy are associated (or correlated) with APro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APro has no effect on the direction of Shin Heung i.e., Shin Heung and APro go up and down completely randomly.

Pair Corralation between Shin Heung and APro

Assuming the 90 days trading horizon Shin Heung Energy is expected to generate 0.94 times more return on investment than APro. However, Shin Heung Energy is 1.07 times less risky than APro. It trades about -0.05 of its potential returns per unit of risk. APro Co is currently generating about -0.05 per unit of risk. If you would invest  1,018,752  in Shin Heung Energy on December 1, 2024 and sell it today you would lose (533,752) from holding Shin Heung Energy or give up 52.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.51%
Values	Daily Returns

Shin Heung Energy  vs.  APro Co

Shin Heung Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shin Heung Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

APro

Risk-Adjusted Performance

Very Weak

Over the last 90 days APro Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shin Heung and APro

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

The idea behind Shin Heung Energy and APro 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 Transaction History module to view history of all your transactions and understand their impact on performance.