Correlation Between China Steel and Shin Kong
Can any of the company-specific risk be diversified away by investing in both China Steel and Shin Kong 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 China Steel and Shin Kong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Steel Chemical and Shin Kong Financial, you can compare the effects of market volatilities on China Steel and Shin Kong 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 China Steel with a short position of Shin Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Shin Kong.
Diversification Opportunities for China Steel and Shin Kong
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Shin is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Shin Kong Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Kong Financial and China Steel 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 China Steel Chemical are associated (or correlated) with Shin Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Kong Financial has no effect on the direction of China Steel i.e., China Steel and Shin Kong go up and down completely randomly.
Pair Corralation between China Steel and Shin Kong
Assuming the 90 days trading horizon China Steel is expected to generate 3.45 times less return on investment than Shin Kong. In addition to that, China Steel is 1.32 times more volatile than Shin Kong Financial. It trades about 0.05 of its total potential returns per unit of risk. Shin Kong Financial is currently generating about 0.21 per unit of volatility. If you would invest 1,140 in Shin Kong Financial on August 29, 2024 and sell it today you would earn a total of 35.00 from holding Shin Kong Financial or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Shin Kong Financial
Performance |
| Timeline |
| China Steel Chemical |
| Shin Kong Financial |
China Steel and Shin Kong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Shin Kong
The main advantage of trading using opposite China Steel and Shin Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Shin Kong 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 Shin Kong will offset losses from the drop in Shin Kong's long position.| China Steel vs. Formosa Chemicals Fibre | China Steel vs. Formosa Plastics Corp | China Steel vs. Cheng Shin Rubber | China Steel vs. President Chain Store |
| Shin Kong vs. Taiwan Secom Co | Shin Kong vs. TTET Union Corp | Shin Kong vs. China Steel Chemical | Shin Kong vs. Taiwan Shin Kong |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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