Correlation Between Shin Shin and Hsin Kao

Can any of the company-specific risk be diversified away by investing in both Shin Shin and Hsin Kao 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 Hsin Kao 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 Hsin Kao Gas, you can compare the effects of market volatilities on Shin Shin and Hsin Kao 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 Hsin Kao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Shin and Hsin Kao.

Diversification Opportunities for Shin Shin and Hsin Kao

0.18

Correlation Coefficient

Shin Shin  Hsin Kao

Average diversification

The 3 months correlation between Shin and Hsin is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Shin Shin Natural and Hsin Kao Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Kao Gas 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 Hsin Kao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Kao Gas has no effect on the direction of Shin Shin i.e., Shin Shin and Hsin Kao go up and down completely randomly.

Pair Corralation between Shin Shin and Hsin Kao

Assuming the 90 days trading horizon Shin Shin Natural is expected to under-perform the Hsin Kao. But the stock apears to be less risky and, when comparing its historical volatility, Shin Shin Natural is 1.04 times less risky than Hsin Kao. The stock trades about -0.07 of its potential returns per unit of risk. The Hsin Kao Gas is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,445  in Hsin Kao Gas on December 29, 2024 and sell it today you would earn a total of  115.00  from holding Hsin Kao Gas or generate 3.34% return on investment over 90 days.

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

Shin Shin Natural  vs.  Hsin Kao Gas

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.

Hsin Kao Gas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hsin Kao Gas are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hsin Kao 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 Hsin Kao

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

The idea behind Shin Shin Natural and Hsin Kao Gas 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.