Correlation Between Goodway Machine and Shihlin Electric
Can any of the company-specific risk be diversified away by investing in both Goodway Machine and Shihlin Electric 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 Goodway Machine and Shihlin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Goodway Machine Corp and Shihlin Electric Engineering, you can compare the effects of market volatilities on Goodway Machine and Shihlin Electric 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 Goodway Machine with a short position of Shihlin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Goodway Machine and Shihlin Electric.
Diversification Opportunities for Goodway Machine and Shihlin Electric
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Goodway and Shihlin is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Goodway Machine Corp and Shihlin Electric Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shihlin Electric Eng and Goodway Machine 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 Goodway Machine Corp are associated (or correlated) with Shihlin Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shihlin Electric Eng has no effect on the direction of Goodway Machine i.e., Goodway Machine and Shihlin Electric go up and down completely randomly.
Pair Corralation between Goodway Machine and Shihlin Electric
Assuming the 90 days trading horizon Goodway Machine Corp is expected to under-perform the Shihlin Electric. But the stock apears to be less risky and, when comparing its historical volatility, Goodway Machine Corp is 3.03 times less risky than Shihlin Electric. The stock trades about -0.03 of its potential returns per unit of risk. The Shihlin Electric Engineering is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 13,250 in Shihlin Electric Engineering on September 2, 2024 and sell it today you would earn a total of 6,600 from holding Shihlin Electric Engineering or generate 49.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Goodway Machine Corp vs. Shihlin Electric Engineering
Performance |
| Timeline |
| Goodway Machine Corp |
| Shihlin Electric Eng |
Goodway Machine and Shihlin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Goodway Machine and Shihlin Electric
The main advantage of trading using opposite Goodway Machine and Shihlin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodway Machine position performs unexpectedly, Shihlin Electric 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 Shihlin Electric will offset losses from the drop in Shihlin Electric's long position.| Goodway Machine vs. Easywell Biomedicals | Goodway Machine vs. Louisa Professional Coffee | Goodway Machine vs. Great China Metal | Goodway Machine vs. Chailease Holding Co |
| Shihlin Electric vs. TECO Electric Machinery | Shihlin Electric vs. Walsin Lihwa Corp | Shihlin Electric vs. Formosa Taffeta Co | Shihlin Electric vs. Far Eastern New |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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