Correlation Between Uni President and Shin Tai
Can any of the company-specific risk be diversified away by investing in both Uni President and Shin Tai 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 Uni President and Shin Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Uni President Enterprises Corp and Shin Tai Industry, you can compare the effects of market volatilities on Uni President and Shin Tai 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 Uni President with a short position of Shin Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uni President and Shin Tai.
Diversification Opportunities for Uni President and Shin Tai
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Uni and Shin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Uni President Enterprises Corp and Shin Tai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Tai Industry and Uni President 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 Uni President Enterprises Corp are associated (or correlated) with Shin Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Tai Industry has no effect on the direction of Uni President i.e., Uni President and Shin Tai go up and down completely randomly.
Pair Corralation between Uni President and Shin Tai
Assuming the 90 days trading horizon Uni President Enterprises Corp is expected to generate 0.52 times more return on investment than Shin Tai. However, Uni President Enterprises Corp is 1.93 times less risky than Shin Tai. It trades about -0.17 of its potential returns per unit of risk. Shin Tai Industry is currently generating about -0.19 per unit of risk. If you would invest 8,980 in Uni President Enterprises Corp on August 29, 2024 and sell it today you would lose (370.00) from holding Uni President Enterprises Corp or give up 4.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Uni President Enterprises Corp vs. Shin Tai Industry
Performance |
| Timeline |
| Uni President Enterp |
| Shin Tai Industry |
Uni President and Shin Tai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Uni President and Shin Tai
The main advantage of trading using opposite Uni President and Shin Tai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uni President position performs unexpectedly, Shin Tai 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 Tai will offset losses from the drop in Shin Tai's long position.| Uni President vs. President Chain Store | Uni President vs. Formosa Plastics Corp | Uni President vs. Nan Ya Plastics | Uni President vs. Taiwan Cement Corp |
| Shin Tai vs. Great Wall Enterprise | Shin Tai vs. Uni President Enterprises Corp | Shin Tai vs. Lien Hwa Industrial |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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