Correlation Between Chien Kuo and Shieh Yih

Can any of the company-specific risk be diversified away by investing in both Chien Kuo and Shieh Yih 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 Chien Kuo and Shieh Yih into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chien Kuo Construction and Shieh Yih Machinery, you can compare the effects of market volatilities on Chien Kuo and Shieh Yih 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 Chien Kuo with a short position of Shieh Yih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chien Kuo and Shieh Yih.

Diversification Opportunities for Chien Kuo and Shieh Yih

-0.62

Correlation Coefficient

Chien Kuo  Shieh Yih

Excellent diversification

The 3 months correlation between Chien and Shieh is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chien Kuo Construction and Shieh Yih Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shieh Yih Machinery and Chien Kuo 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 Chien Kuo Construction are associated (or correlated) with Shieh Yih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shieh Yih Machinery has no effect on the direction of Chien Kuo i.e., Chien Kuo and Shieh Yih go up and down completely randomly.

Pair Corralation between Chien Kuo and Shieh Yih

Assuming the 90 days trading horizon Chien Kuo Construction is expected to under-perform the Shieh Yih. But the stock apears to be less risky and, when comparing its historical volatility, Chien Kuo Construction is 1.53 times less risky than Shieh Yih. The stock trades about 0.0 of its potential returns per unit of risk. The Shieh Yih Machinery is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,770  in Shieh Yih Machinery on September 20, 2024 and sell it today you would earn a total of  190.00  from holding Shieh Yih Machinery or generate 5.04% return on investment over 90 days.

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

Chien Kuo Construction  vs.  Shieh Yih Machinery

Chien Kuo Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chien Kuo Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chien Kuo showed solid returns over the last few months and may actually be approaching a breakup point.

Shieh Yih Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shieh Yih Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shieh Yih 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 Chien Kuo and Shieh Yih

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

The idea behind Chien Kuo Construction and Shieh Yih Machinery 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.