Correlation Between Shinkong Insurance and Taiwan Secom

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

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

Diversification Opportunities for Shinkong Insurance and Taiwan Secom

-0.24

Correlation Coefficient

Shinkong Insurance  Taiwan Secom

Very good diversification

The 3 months correlation between Shinkong and Taiwan is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Shinkong Insurance Co and Taiwan Secom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Secom and Shinkong Insurance 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 Shinkong Insurance Co are associated (or correlated) with Taiwan Secom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Secom has no effect on the direction of Shinkong Insurance i.e., Shinkong Insurance and Taiwan Secom go up and down completely randomly.

Pair Corralation between Shinkong Insurance and Taiwan Secom

Assuming the 90 days trading horizon Shinkong Insurance Co is expected to generate 0.53 times more return on investment than Taiwan Secom. However, Shinkong Insurance Co is 1.87 times less risky than Taiwan Secom. It trades about 0.24 of its potential returns per unit of risk. Taiwan Secom Co is currently generating about -0.08 per unit of risk. If you would invest  9,830  in Shinkong Insurance Co on September 15, 2024 and sell it today you would earn a total of  470.00  from holding Shinkong Insurance Co or generate 4.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Shinkong Insurance Co  vs.  Taiwan Secom Co

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.

Taiwan Secom

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shinkong Insurance and Taiwan Secom

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

The idea behind Shinkong Insurance Co and Taiwan Secom 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.