Correlation Between Shin Kong and New Advanced

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

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

Diversification Opportunities for Shin Kong and New Advanced

-0.28

Correlation Coefficient

Shin Kong  New Advanced

Very good diversification

The 3 months correlation between Shin and New is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and New Advanced Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Advanced Electronics and Shin Kong 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 Kong Financial are associated (or correlated) with New Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Advanced Electronics has no effect on the direction of Shin Kong i.e., Shin Kong and New Advanced go up and down completely randomly.

Pair Corralation between Shin Kong and New Advanced

Assuming the 90 days trading horizon Shin Kong is expected to generate 3.24 times less return on investment than New Advanced. But when comparing it to its historical volatility, Shin Kong Financial is 2.1 times less risky than New Advanced. It trades about 0.32 of its potential returns per unit of risk. New Advanced Electronics is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest  5,330  in New Advanced Electronics on October 26, 2024 and sell it today you would earn a total of  680.00  from holding New Advanced Electronics or generate 12.76% return on investment over 90 days.

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

Shin Kong Financial  vs.  New Advanced Electronics

Shin Kong Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Kong Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shin Kong may actually be approaching a critical reversion point that can send shares even higher in February 2025.

New Advanced Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Advanced Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, New Advanced 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 Shin Kong and New Advanced

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

The idea behind Shin Kong Financial and New Advanced Electronics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.