Correlation Between Shin Kong and NEXCOM International

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

Diversification Opportunities for Shin Kong and NEXCOM International

0.34

Correlation Coefficient

Shin Kong  NEXCOM International

Weak diversification

The 3 months correlation between Shin and NEXCOM is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and NEXCOM International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXCOM International 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 NEXCOM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXCOM International has no effect on the direction of Shin Kong i.e., Shin Kong and NEXCOM International go up and down completely randomly.

Pair Corralation between Shin Kong and NEXCOM International

Assuming the 90 days trading horizon Shin Kong is expected to generate 1.18 times less return on investment than NEXCOM International. But when comparing it to its historical volatility, Shin Kong Financial is 7.82 times less risky than NEXCOM International. It trades about 0.33 of its potential returns per unit of risk. NEXCOM International Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,260  in NEXCOM International Co on October 26, 2024 and sell it today you would earn a total of  250.00  from holding NEXCOM International Co or generate 4.75% 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.  NEXCOM International Co

Shin Kong Financial

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Kong Financial are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Shin Kong is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

NEXCOM International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NEXCOM International Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NEXCOM International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shin Kong and NEXCOM International

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

The idea behind Shin Kong Financial and NEXCOM International 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 Global Correlations module to find global opportunities by holding instruments from different markets.