Correlation Between Shin Foong and Parade Technologies

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

By analyzing existing cross correlation between Shin Foong Specialty and Parade Technologies, you can compare the effects of market volatilities on Shin Foong and Parade Technologies 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 Foong with a short position of Parade Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Foong and Parade Technologies.

Diversification Opportunities for Shin Foong and Parade Technologies

0.01

Correlation Coefficient

Shin Foong  Parade Technologies

Significant diversification

The 3 months correlation between Shin and Parade is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Shin Foong Specialty and Parade Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parade Technologies and Shin Foong 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 Foong Specialty are associated (or correlated) with Parade Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parade Technologies has no effect on the direction of Shin Foong i.e., Shin Foong and Parade Technologies go up and down completely randomly.

Pair Corralation between Shin Foong and Parade Technologies

Assuming the 90 days trading horizon Shin Foong Specialty is expected to under-perform the Parade Technologies. In addition to that, Shin Foong is 1.05 times more volatile than Parade Technologies. It trades about -0.29 of its total potential returns per unit of risk. Parade Technologies is currently generating about -0.22 per unit of volatility. If you would invest  78,100  in Parade Technologies on October 23, 2024 and sell it today you would lose (7,200) from holding Parade Technologies or give up 9.22% of portfolio value over 90 days.

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

Shin Foong Specialty  vs.  Parade Technologies

Shin Foong Specialty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Foong Specialty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Parade Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shin Foong and Parade Technologies

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

The idea behind Shin Foong Specialty and Parade Technologies 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.