Correlation Between USI Corp and Shih Kuen
Can any of the company-specific risk be diversified away by investing in both USI Corp and Shih Kuen 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 USI Corp and Shih Kuen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between USI Corp and Shih Kuen Plastics, you can compare the effects of market volatilities on USI Corp and Shih Kuen 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 USI Corp with a short position of Shih Kuen. Check out your portfolio center. Please also check ongoing floating volatility patterns of USI Corp and Shih Kuen.
Diversification Opportunities for USI Corp and Shih Kuen
Poor diversification
The 3 months correlation between USI and Shih is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding USI Corp and Shih Kuen Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shih Kuen Plastics and USI Corp 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 USI Corp are associated (or correlated) with Shih Kuen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shih Kuen Plastics has no effect on the direction of USI Corp i.e., USI Corp and Shih Kuen go up and down completely randomly.
Pair Corralation between USI Corp and Shih Kuen
Assuming the 90 days trading horizon USI Corp is expected to generate 5.94 times more return on investment than Shih Kuen. However, USI Corp is 5.94 times more volatile than Shih Kuen Plastics. It trades about 0.17 of its potential returns per unit of risk. Shih Kuen Plastics is currently generating about 0.3 per unit of risk. If you would invest 1,050 in USI Corp on November 2, 2024 and sell it today you would earn a total of 115.00 from holding USI Corp or generate 10.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
USI Corp vs. Shih Kuen Plastics
Performance |
| Timeline |
| USI Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Shih Kuen Plastics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
USI Corp and Shih Kuen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with USI Corp and Shih Kuen
The main advantage of trading using opposite USI Corp and Shih Kuen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USI Corp position performs unexpectedly, Shih Kuen 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 Shih Kuen will offset losses from the drop in Shih Kuen's long position.The idea behind USI Corp and Shih Kuen Plastics 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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