Correlation Between Hsin Ba and Shin Tai

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

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

Diversification Opportunities for Hsin Ba and Shin Tai

0.08

Correlation Coefficient

Hsin Ba  Shin Tai

Significant diversification

The 3 months correlation between Hsin and Shin is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hsin Ba Ba and Shin Tai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Tai Industry and Hsin Ba 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 Hsin Ba Ba are associated (or correlated) with Shin Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Tai Industry has no effect on the direction of Hsin Ba i.e., Hsin Ba and Shin Tai go up and down completely randomly.

Pair Corralation between Hsin Ba and Shin Tai

Assuming the 90 days trading horizon Hsin Ba Ba is expected to under-perform the Shin Tai. But the stock apears to be less risky and, when comparing its historical volatility, Hsin Ba Ba is 1.52 times less risky than Shin Tai. The stock trades about -0.08 of its potential returns per unit of risk. The Shin Tai Industry is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,610  in Shin Tai Industry on December 30, 2024 and sell it today you would earn a total of  2,490  from holding Shin Tai Industry or generate 32.72% return on investment over 90 days.

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

Hsin Ba Ba  vs.  Shin Tai Industry

Hsin Ba Ba

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hsin Ba Ba 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.

Shin Tai Industry

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Tai Industry are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shin Tai showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hsin Ba and Shin Tai

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

The idea behind Hsin Ba Ba and Shin Tai Industry 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.