Correlation Between Mercuries Life and Shin Kong

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

By analyzing existing cross correlation between Mercuries Life Insurance and Shin Kong Financial, you can compare the effects of market volatilities on Mercuries Life and Shin Kong 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 Mercuries Life with a short position of Shin Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercuries Life and Shin Kong.

Diversification Opportunities for Mercuries Life and Shin Kong

0.68

Correlation Coefficient

Mercuries Life  Shin Kong

Poor diversification

The 3 months correlation between Mercuries and Shin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Mercuries Life Insurance and Shin Kong Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Kong Financial and Mercuries Life 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 Mercuries Life Insurance are associated (or correlated) with Shin Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Kong Financial has no effect on the direction of Mercuries Life i.e., Mercuries Life and Shin Kong go up and down completely randomly.

Pair Corralation between Mercuries Life and Shin Kong

Assuming the 90 days trading horizon Mercuries Life Insurance is expected to under-perform the Shin Kong. In addition to that, Mercuries Life is 2.95 times more volatile than Shin Kong Financial. It trades about -0.12 of its total potential returns per unit of risk. Shin Kong Financial is currently generating about -0.16 per unit of volatility. If you would invest  3,730  in Shin Kong Financial on September 13, 2024 and sell it today you would lose (165.00) from holding Shin Kong Financial or give up 4.42% of portfolio value over 90 days.

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

Mercuries Life Insurance  vs.  Shin Kong Financial

Mercuries Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mercuries Life Insurance 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.

Shin Kong Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Kong Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Shin Kong is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mercuries Life and Shin Kong

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

The idea behind Mercuries Life Insurance and Shin Kong Financial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.