Correlation Between Shin Kong and Johnson Chemical

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

Diversification Opportunities for Shin Kong and Johnson Chemical

0.27

Correlation Coefficient

Shin Kong  Johnson Chemical

Modest diversification

The 3 months correlation between Shin and Johnson is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and Johnson Chemical Pharmaceutica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Chemical Pha 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 Johnson Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Chemical Pha has no effect on the direction of Shin Kong i.e., Shin Kong and Johnson Chemical go up and down completely randomly.

Pair Corralation between Shin Kong and Johnson Chemical

Assuming the 90 days trading horizon Shin Kong is expected to generate 2.38 times less return on investment than Johnson Chemical. But when comparing it to its historical volatility, Shin Kong Financial is 2.69 times less risky than Johnson Chemical. It trades about 0.17 of its potential returns per unit of risk. Johnson Chemical Pharmaceutical is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,970  in Johnson Chemical Pharmaceutical on December 3, 2024 and sell it today you would earn a total of  1,060  from holding Johnson Chemical Pharmaceutical or generate 15.21% return on investment over 90 days.

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

Shin Kong Financial  vs.  Johnson Chemical Pharmaceutica

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 abnormal basic indicators, Shin Kong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Johnson Chemical Pha

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Chemical Pharmaceutical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Johnson Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shin Kong and Johnson Chemical

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

The idea behind Shin Kong Financial and Johnson Chemical Pharmaceutical 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.