Correlation Between Elite Material and Shih Kuen
Can any of the company-specific risk be diversified away by investing in both Elite Material 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 Elite Material and Shih Kuen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elite Material Co and Shih Kuen Plastics, you can compare the effects of market volatilities on Elite Material 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 Elite Material with a short position of Shih Kuen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Shih Kuen.
Diversification Opportunities for Elite Material and Shih Kuen
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Elite and Shih is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co 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 Elite Material 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 Elite Material Co 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 Elite Material i.e., Elite Material and Shih Kuen go up and down completely randomly.
Pair Corralation between Elite Material and Shih Kuen
Assuming the 90 days trading horizon Elite Material Co is expected to generate 1.49 times more return on investment than Shih Kuen. However, Elite Material is 1.49 times more volatile than Shih Kuen Plastics. It trades about 0.25 of its potential returns per unit of risk. Shih Kuen Plastics is currently generating about -0.23 per unit of risk. If you would invest 42,000 in Elite Material Co on August 30, 2024 and sell it today you would earn a total of 4,750 from holding Elite Material Co or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elite Material Co vs. Shih Kuen Plastics
Performance |
| Timeline |
| Elite Material |
| Shih Kuen Plastics |
Elite Material and Shih Kuen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elite Material and Shih Kuen
The main advantage of trading using opposite Elite Material and Shih Kuen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Material 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 Elite Material Co 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.| Shih Kuen vs. Chain Chon Industrial | Shih Kuen vs. Camellia Metal Co | Shih Kuen vs. Sunspring Metal Corp | Shih Kuen vs. Insyde Software |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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