Correlation Between Tainan Spinning and Shinkong Synthetic
Can any of the company-specific risk be diversified away by investing in both Tainan Spinning and Shinkong Synthetic 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 Tainan Spinning and Shinkong Synthetic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tainan Spinning Co and Shinkong Synthetic Fiber, you can compare the effects of market volatilities on Tainan Spinning and Shinkong Synthetic 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 Tainan Spinning with a short position of Shinkong Synthetic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and Shinkong Synthetic.
Diversification Opportunities for Tainan Spinning and Shinkong Synthetic
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tainan and Shinkong is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Shinkong Synthetic Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Synthetic Fiber and Tainan Spinning 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 Tainan Spinning Co are associated (or correlated) with Shinkong Synthetic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Synthetic Fiber has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Shinkong Synthetic go up and down completely randomly.
Pair Corralation between Tainan Spinning and Shinkong Synthetic
Assuming the 90 days trading horizon Tainan Spinning Co is expected to under-perform the Shinkong Synthetic. In addition to that, Tainan Spinning is 1.39 times more volatile than Shinkong Synthetic Fiber. It trades about -0.06 of its total potential returns per unit of risk. Shinkong Synthetic Fiber is currently generating about 0.28 per unit of volatility. If you would invest 1,465 in Shinkong Synthetic Fiber on November 3, 2024 and sell it today you would earn a total of 50.00 from holding Shinkong Synthetic Fiber or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tainan Spinning Co vs. Shinkong Synthetic Fiber
Performance |
| Timeline |
| Tainan Spinning |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Shinkong Synthetic Fiber |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Tainan Spinning and Shinkong Synthetic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tainan Spinning and Shinkong Synthetic
The main advantage of trading using opposite Tainan Spinning and Shinkong Synthetic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainan Spinning position performs unexpectedly, Shinkong Synthetic 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 Shinkong Synthetic will offset losses from the drop in Shinkong Synthetic's long position.The idea behind Tainan Spinning Co and Shinkong Synthetic Fiber 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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