Correlation Between Shin Kong and Kuo Yang

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

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

Diversification Opportunities for Shin Kong and Kuo Yang

0.64

Correlation Coefficient

Shin Kong  Kuo Yang

Poor diversification

The 3 months correlation between Shin and Kuo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and Kuo Yang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuo Yang Construction and Shin Kong 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 Kong Financial are associated (or correlated) with Kuo Yang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuo Yang Construction has no effect on the direction of Shin Kong i.e., Shin Kong and Kuo Yang go up and down completely randomly.

Pair Corralation between Shin Kong and Kuo Yang

Assuming the 90 days trading horizon Shin Kong Financial is expected to generate 0.55 times more return on investment than Kuo Yang. However, Shin Kong Financial is 1.83 times less risky than Kuo Yang. It trades about -0.02 of its potential returns per unit of risk. Kuo Yang Construction is currently generating about -0.01 per unit of risk. If you would invest  1,200  in Shin Kong Financial on September 26, 2024 and sell it today you would lose (15.00) from holding Shin Kong Financial or give up 1.25% of portfolio value over 90 days.

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

Shin Kong Financial  vs.  Kuo Yang Construction

Shin Kong Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kuo Yang Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Shin Kong Financial and Kuo Yang Construction 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.