Correlation Between Walsin Lihwa and Shihlin Electric
Can any of the company-specific risk be diversified away by investing in both Walsin Lihwa 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 Walsin Lihwa and Shihlin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walsin Lihwa Corp and Shihlin Electric Engineering, you can compare the effects of market volatilities on Walsin Lihwa 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 Walsin Lihwa with a short position of Shihlin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walsin Lihwa and Shihlin Electric.
Diversification Opportunities for Walsin Lihwa and Shihlin Electric
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Walsin and Shihlin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Lihwa 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 Walsin Lihwa 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 Walsin Lihwa 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 Walsin Lihwa i.e., Walsin Lihwa and Shihlin Electric go up and down completely randomly.
Pair Corralation between Walsin Lihwa and Shihlin Electric
Assuming the 90 days trading horizon Walsin Lihwa Corp is expected to under-perform the Shihlin Electric. But the stock apears to be less risky and, when comparing its historical volatility, Walsin Lihwa Corp is 1.79 times less risky than Shihlin Electric. The stock trades about -0.07 of its potential returns per unit of risk. The Shihlin Electric Engineering is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 14,850 in Shihlin Electric Engineering on September 2, 2024 and sell it today you would earn a total of 5,000 from holding Shihlin Electric Engineering or generate 33.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walsin Lihwa Corp vs. Shihlin Electric Engineering
Performance |
| Timeline |
| Walsin Lihwa Corp |
| Shihlin Electric Eng |
Walsin Lihwa and Shihlin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walsin Lihwa and Shihlin Electric
The main advantage of trading using opposite Walsin Lihwa and Shihlin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walsin Lihwa 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.| Walsin Lihwa vs. TECO Electric Machinery | Walsin Lihwa vs. Far Eastern New | Walsin Lihwa vs. Nan Ya Plastics | Walsin Lihwa vs. Winbond Electronics Corp |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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