Correlation Between Shin Zu and Chia Yi

Can any of the company-specific risk be diversified away by investing in both Shin Zu and Chia Yi 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 Zu and Chia Yi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shin Zu Shing and Chia Yi Steel, you can compare the effects of market volatilities on Shin Zu and Chia Yi 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 Zu with a short position of Chia Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Zu and Chia Yi.

Diversification Opportunities for Shin Zu and Chia Yi

-0.69

Correlation Coefficient

Shin Zu  Chia Yi

Excellent diversification

The 3 months correlation between Shin and Chia is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shin Zu Shing and Chia Yi Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Yi Steel and Shin Zu 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 Zu Shing are associated (or correlated) with Chia Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Yi Steel has no effect on the direction of Shin Zu i.e., Shin Zu and Chia Yi go up and down completely randomly.

Pair Corralation between Shin Zu and Chia Yi

Assuming the 90 days trading horizon Shin Zu Shing is expected to generate 2.58 times more return on investment than Chia Yi. However, Shin Zu is 2.58 times more volatile than Chia Yi Steel. It trades about 0.11 of its potential returns per unit of risk. Chia Yi Steel is currently generating about -0.19 per unit of risk. If you would invest  20,450  in Shin Zu Shing on December 29, 2024 and sell it today you would earn a total of  4,000  from holding Shin Zu Shing or generate 19.56% return on investment over 90 days.

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

Shin Zu Shing  vs.  Chia Yi Steel

Shin Zu Shing

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Zu Shing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shin Zu showed solid returns over the last few months and may actually be approaching a breakup point.

Chia Yi Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chia Yi Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Shin Zu and Chia Yi

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

The idea behind Shin Zu Shing and Chia Yi Steel 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..