Correlation Between Shan Loong and ABC Taiwan
Can any of the company-specific risk be diversified away by investing in both Shan Loong and ABC Taiwan 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 ABC Taiwan 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 ABC Taiwan Electronics, you can compare the effects of market volatilities on Shan Loong and ABC Taiwan 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 ABC Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shan Loong and ABC Taiwan.
Diversification Opportunities for Shan Loong and ABC Taiwan
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shan and ABC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Shan Loong Transportation Co and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics 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 ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of Shan Loong i.e., Shan Loong and ABC Taiwan go up and down completely randomly.
Pair Corralation between Shan Loong and ABC Taiwan
Assuming the 90 days trading horizon Shan Loong Transportation Co is expected to under-perform the ABC Taiwan. But the stock apears to be less risky and, when comparing its historical volatility, Shan Loong Transportation Co is 1.59 times less risky than ABC Taiwan. The stock trades about -0.13 of its potential returns per unit of risk. The ABC Taiwan Electronics is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,260 in ABC Taiwan Electronics on September 5, 2024 and sell it today you would earn a total of 110.00 from holding ABC Taiwan Electronics or generate 4.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shan Loong Transportation Co vs. ABC Taiwan Electronics
Performance |
| Timeline |
| Shan Loong Transport |
| ABC Taiwan Electronics |
Shan Loong and ABC Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shan Loong and ABC Taiwan
The main advantage of trading using opposite Shan Loong and ABC Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shan Loong position performs unexpectedly, ABC Taiwan 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 ABC Taiwan will offset losses from the drop in ABC Taiwan's 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 |
| ABC Taiwan vs. Wha Yu Industrial | ABC Taiwan vs. Shan Loong Transportation Co | ABC Taiwan vs. Ton Yi Industrial | ABC Taiwan vs. Chinese Maritime Transport |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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