Correlation Between Shan Loong and Eternal Materials
Can any of the company-specific risk be diversified away by investing in both Shan Loong and Eternal Materials 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 Shan Loong and Eternal Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shan Loong Transportation Co and Eternal Materials Co, you can compare the effects of market volatilities on Shan Loong and Eternal Materials 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 Shan Loong with a short position of Eternal Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shan Loong and Eternal Materials.
Diversification Opportunities for Shan Loong and Eternal Materials
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shan and Eternal is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Shan Loong Transportation Co and Eternal Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Materials and Shan Loong 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 Shan Loong Transportation Co are associated (or correlated) with Eternal Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Materials has no effect on the direction of Shan Loong i.e., Shan Loong and Eternal Materials go up and down completely randomly.
Pair Corralation between Shan Loong and Eternal Materials
Assuming the 90 days trading horizon Shan Loong Transportation Co is expected to under-perform the Eternal Materials. But the stock apears to be less risky and, when comparing its historical volatility, Shan Loong Transportation Co is 1.28 times less risky than Eternal Materials. The stock trades about -0.17 of its potential returns per unit of risk. The Eternal Materials Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,190 in Eternal Materials Co on September 3, 2024 and sell it today you would lose (210.00) from holding Eternal Materials Co or give up 6.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shan Loong Transportation Co vs. Eternal Materials Co
Performance |
| Timeline |
| Shan Loong Transport |
| Eternal Materials |
Shan Loong and Eternal Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shan Loong and Eternal Materials
The main advantage of trading using opposite Shan Loong and Eternal Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shan Loong position performs unexpectedly, Eternal Materials 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 Eternal Materials will offset losses from the drop in Eternal Materials' long position.| Shan Loong vs. Tainan Spinning Co | Shan Loong vs. Chia Her Industrial | Shan Loong vs. WiseChip Semiconductor | Shan Loong vs. Novatek Microelectronics Corp |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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