Correlation Between Shin Kong and Magnate Technology

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

Diversification Opportunities for Shin Kong and Magnate Technology

0.59

Correlation Coefficient

Shin Kong  Magnate Technology

Very weak diversification

The 3 months correlation between Shin and Magnate is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and Magnate Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnate Technology 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 Magnate Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnate Technology has no effect on the direction of Shin Kong i.e., Shin Kong and Magnate Technology go up and down completely randomly.

Pair Corralation between Shin Kong and Magnate Technology

Assuming the 90 days trading horizon Shin Kong is expected to generate 7.56 times less return on investment than Magnate Technology. But when comparing it to its historical volatility, Shin Kong Financial is 6.75 times less risky than Magnate Technology. It trades about 0.17 of its potential returns per unit of risk. Magnate Technology Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,655  in Magnate Technology Co on December 29, 2024 and sell it today you would earn a total of  1,675  from holding Magnate Technology Co or generate 45.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.25%
Values	Daily Returns

Shin Kong Financial  vs.  Magnate Technology Co

Shin Kong Financial

Risk-Adjusted Performance

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 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.

Magnate Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magnate Technology Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Magnate Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shin Kong and Magnate Technology

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

The idea behind Shin Kong Financial and Magnate Technology 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.