Correlation Between Hua Nan and Shinkong Insurance

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

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

Diversification Opportunities for Hua Nan and Shinkong Insurance

0.46

Correlation Coefficient

Hua Nan  Shinkong Insurance

Very weak diversification

The 3 months correlation between Hua and Shinkong is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hua Nan Financial and Shinkong Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Insurance and Hua Nan 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 Hua Nan Financial 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 Hua Nan i.e., Hua Nan and Shinkong Insurance go up and down completely randomly.

Pair Corralation between Hua Nan and Shinkong Insurance

Assuming the 90 days trading horizon Hua Nan is expected to generate 1.91 times less return on investment than Shinkong Insurance. But when comparing it to its historical volatility, Hua Nan Financial is 1.32 times less risky than Shinkong Insurance. It trades about 0.11 of its potential returns per unit of risk. Shinkong Insurance Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  9,200  in Shinkong Insurance Co on September 15, 2024 and sell it today you would earn a total of  1,100  from holding Shinkong Insurance Co or generate 11.96% return on investment over 90 days.

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

Hua Nan Financial  vs.  Shinkong Insurance Co

Hua Nan Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Nan Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hua Nan 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 Hua Nan and Shinkong Insurance

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

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.