Correlation Between Shan Loong and Silicon Power
Can any of the company-specific risk be diversified away by investing in both Shan Loong and Silicon Power 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 Silicon Power 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 Silicon Power Computer, you can compare the effects of market volatilities on Shan Loong and Silicon Power 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 Silicon Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shan Loong and Silicon Power.
Diversification Opportunities for Shan Loong and Silicon Power
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shan and Silicon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Shan Loong Transportation Co and Silicon Power Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Power Computer 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 Silicon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Power Computer has no effect on the direction of Shan Loong i.e., Shan Loong and Silicon Power go up and down completely randomly.
Pair Corralation between Shan Loong and Silicon Power
Assuming the 90 days trading horizon Shan Loong is expected to generate 1.19 times less return on investment than Silicon Power. In addition to that, Shan Loong is 1.76 times more volatile than Silicon Power Computer. It trades about 0.12 of its total potential returns per unit of risk. Silicon Power Computer is currently generating about 0.25 per unit of volatility. If you would invest 3,045 in Silicon Power Computer on November 4, 2024 and sell it today you would earn a total of 100.00 from holding Silicon Power Computer or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shan Loong Transportation Co vs. Silicon Power Computer
Performance |
| Timeline |
| Shan Loong Transport |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Silicon Power Computer |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Shan Loong and Silicon Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shan Loong and Silicon Power
The main advantage of trading using opposite Shan Loong and Silicon Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shan Loong position performs unexpectedly, Silicon Power 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 Silicon Power will offset losses from the drop in Silicon Power's long position.The idea behind Shan Loong Transportation Co and Silicon Power Computer 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.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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