Correlation Between Hi Lai and An Shin
Can any of the company-specific risk be diversified away by investing in both Hi Lai and An 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 Hi Lai and An Shin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hi Lai Foods Co and An Shin Food Services, you can compare the effects of market volatilities on Hi Lai and An 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 Hi Lai with a short position of An Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hi Lai and An Shin.
Diversification Opportunities for Hi Lai and An Shin
Good diversification
The 3 months correlation between 1268 and 1259 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hi Lai Foods Co and An Shin Food Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on An Shin Food and Hi Lai 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 Hi Lai Foods Co are associated (or correlated) with An Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of An Shin Food has no effect on the direction of Hi Lai i.e., Hi Lai and An Shin go up and down completely randomly.
Pair Corralation between Hi Lai and An Shin
Assuming the 90 days trading horizon Hi Lai Foods Co is expected to generate 0.75 times more return on investment than An Shin. However, Hi Lai Foods Co is 1.34 times less risky than An Shin. It trades about -0.26 of its potential returns per unit of risk. An Shin Food Services is currently generating about -0.23 per unit of risk. If you would invest 15,500 in Hi Lai Foods Co on August 28, 2024 and sell it today you would lose (400.00) from holding Hi Lai Foods Co or give up 2.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hi Lai Foods Co vs. An Shin Food Services
Performance |
| Timeline |
| Hi Lai Foods |
| An Shin Food |
Hi Lai and An Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hi Lai and An Shin
The main advantage of trading using opposite Hi Lai and An Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hi Lai position performs unexpectedly, An 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 An Shin will offset losses from the drop in An Shin's long position.The idea behind Hi Lai Foods Co and An Shin Food Services 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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