Correlation Between Sinopac Financial and President Chain

Can any of the company-specific risk be diversified away by investing in both Sinopac Financial and President Chain 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 Sinopac Financial and President Chain into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinopac Financial Holdings and President Chain Store, you can compare the effects of market volatilities on Sinopac Financial and President Chain 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 Sinopac Financial with a short position of President Chain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopac Financial and President Chain.

Diversification Opportunities for Sinopac Financial and President Chain

0.76

Correlation Coefficient

Sinopac Financial  President Chain

Poor diversification

The 3 months correlation between Sinopac and President is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sinopac Financial Holdings and President Chain Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Chain Store and Sinopac Financial 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 Sinopac Financial Holdings are associated (or correlated) with President Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Chain Store has no effect on the direction of Sinopac Financial i.e., Sinopac Financial and President Chain go up and down completely randomly.

Pair Corralation between Sinopac Financial and President Chain

Assuming the 90 days trading horizon Sinopac Financial Holdings is expected to under-perform the President Chain. In addition to that, Sinopac Financial is 1.17 times more volatile than President Chain Store. It trades about -0.11 of its total potential returns per unit of risk. President Chain Store is currently generating about -0.08 per unit of volatility. If you would invest  27,200  in President Chain Store on December 1, 2024 and sell it today you would lose (950.00) from holding President Chain Store or give up 3.49% of portfolio value over 90 days.

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

Sinopac Financial Holdings  vs.  President Chain Store

Sinopac Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinopac Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sinopac Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

President Chain Store

Risk-Adjusted Performance

Very Weak

Over the last 90 days President Chain Store has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, President Chain 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 Sinopac Financial and President Chain

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

The idea behind Sinopac Financial Holdings and President Chain Store 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.