Correlation Between Hsinli Chemical and Shih Kuen

Can any of the company-specific risk be diversified away by investing in both Hsinli Chemical and Shih Kuen 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 Hsinli Chemical and Shih Kuen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hsinli Chemical Industrial and Shih Kuen Plastics, you can compare the effects of market volatilities on Hsinli Chemical and Shih Kuen 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 Hsinli Chemical with a short position of Shih Kuen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsinli Chemical and Shih Kuen.

Diversification Opportunities for Hsinli Chemical and Shih Kuen

0.89

Correlation Coefficient

Hsinli Chemical  Shih Kuen

Very poor diversification

The 3 months correlation between Hsinli and Shih is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hsinli Chemical Industrial and Shih Kuen Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shih Kuen Plastics and Hsinli Chemical 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 Hsinli Chemical Industrial are associated (or correlated) with Shih Kuen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shih Kuen Plastics has no effect on the direction of Hsinli Chemical i.e., Hsinli Chemical and Shih Kuen go up and down completely randomly.

Pair Corralation between Hsinli Chemical and Shih Kuen

Assuming the 90 days trading horizon Hsinli Chemical Industrial is expected to generate 4.63 times more return on investment than Shih Kuen. However, Hsinli Chemical is 4.63 times more volatile than Shih Kuen Plastics. It trades about 0.34 of its potential returns per unit of risk. Shih Kuen Plastics is currently generating about 0.26 per unit of risk. If you would invest  4,905  in Hsinli Chemical Industrial on December 21, 2024 and sell it today you would earn a total of  4,195  from holding Hsinli Chemical Industrial or generate 85.52% return on investment over 90 days.

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

Hsinli Chemical Industrial  vs.  Shih Kuen Plastics

Hsinli Chemical Indu

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Hsinli Chemical Industrial are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hsinli Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

Shih Kuen Plastics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shih Kuen Plastics are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shih Kuen may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hsinli Chemical and Shih Kuen

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

The idea behind Hsinli Chemical Industrial and Shih Kuen Plastics 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.