Correlation Between Shin Kong and Shieh Yih

Can any of the company-specific risk be diversified away by investing in both Shin Kong and Shieh Yih 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 Shieh Yih 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 Shieh Yih Machinery, you can compare the effects of market volatilities on Shin Kong and Shieh Yih 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 Shieh Yih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Kong and Shieh Yih.

Diversification Opportunities for Shin Kong and Shieh Yih

-0.36

Correlation Coefficient

Shin Kong  Shieh Yih

Very good diversification

The 3 months correlation between Shin and Shieh is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and Shieh Yih Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shieh Yih Machinery 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 Shieh Yih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shieh Yih Machinery has no effect on the direction of Shin Kong i.e., Shin Kong and Shieh Yih go up and down completely randomly.

Pair Corralation between Shin Kong and Shieh Yih

Assuming the 90 days trading horizon Shin Kong is expected to generate 1.68 times less return on investment than Shieh Yih. But when comparing it to its historical volatility, Shin Kong Financial is 1.89 times less risky than Shieh Yih. It trades about 0.08 of its potential returns per unit of risk. Shieh Yih Machinery is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,355  in Shieh Yih Machinery on October 7, 2024 and sell it today you would earn a total of  1,255  from holding Shieh Yih Machinery or generate 53.29% 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.  Shieh Yih Machinery

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 fairly stable basic indicators, Shin Kong is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Shieh Yih Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shieh Yih Machinery 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.

Pair Trading with Shin Kong and Shieh Yih

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

The idea behind Shin Kong Financial and Shieh Yih Machinery 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.