Correlation Between Hung Sheng and Taiwan Shin

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

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

Diversification Opportunities for Hung Sheng and Taiwan Shin

0.23

Correlation Coefficient

Hung Sheng  Taiwan Shin

Modest diversification

The 3 months correlation between Hung and Taiwan is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction 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 Hung Sheng 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 Hung Sheng Construction 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 Hung Sheng i.e., Hung Sheng and Taiwan Shin go up and down completely randomly.

Pair Corralation between Hung Sheng and Taiwan Shin

Assuming the 90 days trading horizon Hung Sheng Construction is expected to generate 4.21 times more return on investment than Taiwan Shin. However, Hung Sheng is 4.21 times more volatile than Taiwan Shin Kong. It trades about 0.01 of its potential returns per unit of risk. Taiwan Shin Kong is currently generating about -0.05 per unit of risk. If you would invest  2,705  in Hung Sheng Construction on September 2, 2024 and sell it today you would lose (10.00) from holding Hung Sheng Construction or give up 0.37% of portfolio value over 90 days.

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

Hung Sheng Construction  vs.  Taiwan Shin Kong

Hung Sheng Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hung Sheng Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hung Sheng 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

0 of 100

Very Weak

Over the last 90 days Taiwan Shin Kong has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Hung Sheng and Taiwan Shin

The main advantage of trading using opposite Hung Sheng and Taiwan Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hung Sheng 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 Hung Sheng Construction 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.