Correlation Between Paiho Shih and Shui Mu

Can any of the company-specific risk be diversified away by investing in both Paiho Shih and Shui Mu 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 Paiho Shih and Shui Mu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Paiho Shih Holdings and Shui Mu International Co, you can compare the effects of market volatilities on Paiho Shih and Shui Mu 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 Paiho Shih with a short position of Shui Mu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paiho Shih and Shui Mu.

Diversification Opportunities for Paiho Shih and Shui Mu

0.66

Correlation Coefficient

Paiho Shih  Shui Mu

Poor diversification

The 3 months correlation between Paiho and Shui is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Paiho Shih Holdings and Shui Mu International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shui Mu International and Paiho Shih 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 Paiho Shih Holdings are associated (or correlated) with Shui Mu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shui Mu International has no effect on the direction of Paiho Shih i.e., Paiho Shih and Shui Mu go up and down completely randomly.

Pair Corralation between Paiho Shih and Shui Mu

Assuming the 90 days trading horizon Paiho Shih Holdings is expected to under-perform the Shui Mu. In addition to that, Paiho Shih is 5.49 times more volatile than Shui Mu International Co. It trades about -0.07 of its total potential returns per unit of risk. Shui Mu International Co is currently generating about 0.05 per unit of volatility. If you would invest  1,175  in Shui Mu International Co on September 3, 2024 and sell it today you would earn a total of  5.00  from holding Shui Mu International Co or generate 0.43% return on investment over 90 days.

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

Paiho Shih Holdings  vs.  Shui Mu International Co

Paiho Shih Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Paiho Shih Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Paiho Shih showed solid returns over the last few months and may actually be approaching a breakup point.

Shui Mu International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shui Mu International Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Shui Mu 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 Paiho Shih and Shui Mu

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

The idea behind Paiho Shih Holdings and Shui Mu International 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.