Correlation Between Shin Hai and Hsin Kao

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

Diversification Opportunities for Shin Hai and Hsin Kao

0.37

Correlation Coefficient

Shin Hai  Hsin Kao

Weak diversification

The 3 months correlation between Shin and Hsin is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Shin Hai Gas 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 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 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 Hai i.e., Shin Hai and Hsin Kao go up and down completely randomly.

Pair Corralation between Shin Hai and Hsin Kao

Assuming the 90 days trading horizon Shin Hai Gas is expected to under-perform the Hsin Kao. In addition to that, Shin Hai is 1.13 times more volatile than Hsin Kao Gas. It trades about -0.03 of its total potential returns per unit of risk. Hsin Kao Gas is currently generating about 0.01 per unit of volatility. If you would invest  3,450  in Hsin Kao Gas on December 2, 2024 and sell it today you would earn a total of  5.00  from holding Hsin Kao Gas or generate 0.14% return on investment over 90 days.

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

Shin Hai Gas  vs.  Hsin Kao Gas

Shin Hai Gas

Risk-Adjusted Performance

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.

Hsin Kao Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hsin Kao Gas has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Hai and Hsin Kao

The main advantage of trading using opposite Shin Hai and Hsin Kao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Hai 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 Hai Gas 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.