Correlation Between Shin Shin and Taiwan Shin

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

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

Diversification Opportunities for Shin Shin and Taiwan Shin

0.54

Correlation Coefficient

Shin Shin  Taiwan Shin

Very weak diversification

The 3 months correlation between Shin and Taiwan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Shin Shin Natural and Taiwan Shin Kong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Shin Kong and Shin Shin 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 Shin Natural are associated (or correlated) with Taiwan Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Shin Kong has no effect on the direction of Shin Shin i.e., Shin Shin and Taiwan Shin go up and down completely randomly.

Pair Corralation between Shin Shin and Taiwan Shin

Assuming the 90 days trading horizon Shin Shin is expected to generate 1.65 times less return on investment than Taiwan Shin. In addition to that, Shin Shin is 1.2 times more volatile than Taiwan Shin Kong. It trades about 0.07 of its total potential returns per unit of risk. Taiwan Shin Kong is currently generating about 0.14 per unit of volatility. If you would invest  4,100  in Taiwan Shin Kong on December 2, 2024 and sell it today you would earn a total of  70.00  from holding Taiwan Shin Kong or generate 1.71% return on investment over 90 days.

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

Shin Shin Natural  vs.  Taiwan Shin Kong

Shin Shin Natural

Risk-Adjusted Performance

Very Weak

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

Taiwan Shin Kong

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Shin Kong are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Shin 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 Shin Shin and Taiwan Shin

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

The idea behind Shin Shin Natural and Taiwan Shin Kong 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.