Correlation Between Kuo Yang and Shin Zu

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

By analyzing existing cross correlation between Kuo Yang Construction and Shin Zu Shing, you can compare the effects of market volatilities on Kuo Yang and Shin Zu 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 Kuo Yang with a short position of Shin Zu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuo Yang and Shin Zu.

Diversification Opportunities for Kuo Yang and Shin Zu

0.61

Correlation Coefficient

Kuo Yang  Shin Zu

Poor diversification

The 3 months correlation between Kuo and Shin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kuo Yang Construction and Shin Zu Shing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Zu Shing and Kuo Yang 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 Kuo Yang Construction are associated (or correlated) with Shin Zu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Zu Shing has no effect on the direction of Kuo Yang i.e., Kuo Yang and Shin Zu go up and down completely randomly.

Pair Corralation between Kuo Yang and Shin Zu

Assuming the 90 days trading horizon Kuo Yang is expected to generate 3.79 times less return on investment than Shin Zu. But when comparing it to its historical volatility, Kuo Yang Construction is 1.7 times less risky than Shin Zu. It trades about 0.04 of its potential returns per unit of risk. Shin Zu Shing is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,929  in Shin Zu Shing on October 5, 2024 and sell it today you would earn a total of  12,271  from holding Shin Zu Shing or generate 154.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Kuo Yang Construction  vs.  Shin Zu Shing

Kuo Yang Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuo Yang Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kuo Yang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Shin Zu Shing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Zu Shing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shin Zu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kuo Yang and Shin Zu

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

The idea behind Kuo Yang Construction and Shin Zu Shing 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.