Correlation Between Shih Wei and Kunyue Development

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

By analyzing existing cross correlation between Shih Wei Navigation and Kunyue Development Co, you can compare the effects of market volatilities on Shih Wei and Kunyue Development 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 Shih Wei with a short position of Kunyue Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shih Wei and Kunyue Development.

Diversification Opportunities for Shih Wei and Kunyue Development

0.82

Correlation Coefficient

Shih Wei  Kunyue Development

Very poor diversification

The 3 months correlation between Shih and Kunyue is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Shih Wei Navigation and Kunyue Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunyue Development and Shih Wei 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 Shih Wei Navigation are associated (or correlated) with Kunyue Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunyue Development has no effect on the direction of Shih Wei i.e., Shih Wei and Kunyue Development go up and down completely randomly.

Pair Corralation between Shih Wei and Kunyue Development

Assuming the 90 days trading horizon Shih Wei Navigation is expected to generate 1.71 times more return on investment than Kunyue Development. However, Shih Wei is 1.71 times more volatile than Kunyue Development Co. It trades about 0.13 of its potential returns per unit of risk. Kunyue Development Co is currently generating about 0.08 per unit of risk. If you would invest  1,685  in Shih Wei Navigation on December 22, 2024 and sell it today you would earn a total of  335.00  from holding Shih Wei Navigation or generate 19.88% return on investment over 90 days.

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

Shih Wei Navigation  vs.  Kunyue Development Co

Shih Wei Navigation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shih Wei Navigation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shih Wei showed solid returns over the last few months and may actually be approaching a breakup point.

Kunyue Development

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kunyue Development Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kunyue Development may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shih Wei and Kunyue Development

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

The idea behind Shih Wei Navigation and Kunyue Development 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.