Correlation Between Paiho Shih and Hsinli Chemical

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

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

Diversification Opportunities for Paiho Shih and Hsinli Chemical

0.36

Correlation Coefficient

Paiho Shih  Hsinli Chemical

Weak diversification

The 3 months correlation between Paiho and Hsinli is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Paiho Shih Holdings and Hsinli Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsinli Chemical Indu and Paiho Shih 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 Paiho Shih Holdings are associated (or correlated) with Hsinli Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsinli Chemical Indu has no effect on the direction of Paiho Shih i.e., Paiho Shih and Hsinli Chemical go up and down completely randomly.

Pair Corralation between Paiho Shih and Hsinli Chemical

Assuming the 90 days trading horizon Paiho Shih Holdings is expected to under-perform the Hsinli Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Paiho Shih Holdings is 1.49 times less risky than Hsinli Chemical. The stock trades about -0.28 of its potential returns per unit of risk. The Hsinli Chemical Industrial is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,970  in Hsinli Chemical Industrial on September 27, 2024 and sell it today you would lose (160.00) from holding Hsinli Chemical Industrial or give up 3.22% of portfolio value over 90 days.

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

Paiho Shih Holdings  vs.  Hsinli Chemical Industrial

Paiho Shih Holdings

Risk-Adjusted Performance

8 of 100

OK

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

Hsinli Chemical Indu

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hsinli Chemical Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hsinli Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Paiho Shih and Hsinli Chemical

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

The idea behind Paiho Shih Holdings and Hsinli Chemical Industrial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.