Correlation Between Shin Hai and Taiwan Cogeneration

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

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

Diversification Opportunities for Shin Hai and Taiwan Cogeneration

0.85

Correlation Coefficient

Shin Hai  Taiwan Cogeneration

Very poor diversification

The 3 months correlation between Shin and Taiwan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shin Hai Gas and Taiwan Cogeneration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cogeneration Corp and Shin Hai 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 Hai Gas are associated (or correlated) with Taiwan Cogeneration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cogeneration Corp has no effect on the direction of Shin Hai i.e., Shin Hai and Taiwan Cogeneration go up and down completely randomly.

Pair Corralation between Shin Hai and Taiwan Cogeneration

Assuming the 90 days trading horizon Shin Hai Gas is expected to under-perform the Taiwan Cogeneration. But the stock apears to be less risky and, when comparing its historical volatility, Shin Hai Gas is 2.03 times less risky than Taiwan Cogeneration. The stock trades about -0.02 of its potential returns per unit of risk. The Taiwan Cogeneration Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,020  in Taiwan Cogeneration Corp on September 4, 2024 and sell it today you would earn a total of  245.00  from holding Taiwan Cogeneration Corp or generate 6.09% return on investment over 90 days.

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

Shin Hai Gas  vs.  Taiwan Cogeneration Corp

Shin Hai Gas

Risk-Adjusted Performance

0 of 100

Very Weak

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

Taiwan Cogeneration Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Cogeneration Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Cogeneration 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 Hai and Taiwan Cogeneration

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

The idea behind Shin Hai Gas and Taiwan Cogeneration Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.