Correlation Between Shinkong Textile and Advancetek Enterprise

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

By analyzing existing cross correlation between Shinkong Textile Co and Advancetek Enterprise Co, you can compare the effects of market volatilities on Shinkong Textile and Advancetek Enterprise 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 Shinkong Textile with a short position of Advancetek Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinkong Textile and Advancetek Enterprise.

Diversification Opportunities for Shinkong Textile and Advancetek Enterprise

-0.11

Correlation Coefficient

Shinkong Textile  Advancetek Enterprise

Good diversification

The 3 months correlation between Shinkong and Advancetek is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Shinkong Textile Co and Advancetek Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advancetek Enterprise and Shinkong Textile 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 Shinkong Textile Co are associated (or correlated) with Advancetek Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advancetek Enterprise has no effect on the direction of Shinkong Textile i.e., Shinkong Textile and Advancetek Enterprise go up and down completely randomly.

Pair Corralation between Shinkong Textile and Advancetek Enterprise

Assuming the 90 days trading horizon Shinkong Textile Co is expected to under-perform the Advancetek Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Shinkong Textile Co is 2.47 times less risky than Advancetek Enterprise. The stock trades about -0.06 of its potential returns per unit of risk. The Advancetek Enterprise Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,340  in Advancetek Enterprise Co on September 3, 2024 and sell it today you would earn a total of  1,800  from holding Advancetek Enterprise Co or generate 28.39% return on investment over 90 days.

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

Shinkong Textile Co  vs.  Advancetek Enterprise Co

Shinkong Textile

Risk-Adjusted Performance

0 of 100

Very Weak

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

Advancetek Enterprise

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advancetek Enterprise Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advancetek Enterprise showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinkong Textile and Advancetek Enterprise

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

The idea behind Shinkong Textile Co and Advancetek Enterprise Co 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.