Correlation Between Taiwan Cogeneration and Shin Shin

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

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

Diversification Opportunities for Taiwan Cogeneration and Shin Shin

0.48

Correlation Coefficient

Taiwan Cogeneration  Shin Shin

Very weak diversification

The 3 months correlation between Taiwan and Shin is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cogeneration Corp and Shin Shin Natural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Shin Natural and Taiwan Cogeneration 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 Taiwan Cogeneration Corp are associated (or correlated) with Shin Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Shin Natural has no effect on the direction of Taiwan Cogeneration i.e., Taiwan Cogeneration and Shin Shin go up and down completely randomly.

Pair Corralation between Taiwan Cogeneration and Shin Shin

Assuming the 90 days trading horizon Taiwan Cogeneration Corp is expected to under-perform the Shin Shin. In addition to that, Taiwan Cogeneration is 1.37 times more volatile than Shin Shin Natural. It trades about -0.08 of its total potential returns per unit of risk. Shin Shin Natural is currently generating about -0.04 per unit of volatility. If you would invest  4,120  in Shin Shin Natural on September 3, 2024 and sell it today you would lose (95.00) from holding Shin Shin Natural or give up 2.31% of portfolio value over 90 days.

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

Taiwan Cogeneration Corp  vs.  Shin Shin Natural

Taiwan Cogeneration Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shin Shin Natural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Shin Natural has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shin 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 Taiwan Cogeneration and Shin Shin

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

The idea behind Taiwan Cogeneration Corp and Shin Shin Natural 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..