Correlation Between Taichung Commercial and Shin Kong
Can any of the company-specific risk be diversified away by investing in both Taichung Commercial 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 Taichung Commercial and Shin Kong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taichung Commercial Bank and Shin Kong Financial, you can compare the effects of market volatilities on Taichung Commercial 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 Taichung Commercial with a short position of Shin Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taichung Commercial and Shin Kong.
Diversification Opportunities for Taichung Commercial and Shin Kong
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Taichung and Shin is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Taichung Commercial Bank 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 Taichung Commercial 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 Taichung Commercial Bank 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 Taichung Commercial i.e., Taichung Commercial and Shin Kong go up and down completely randomly.
Pair Corralation between Taichung Commercial and Shin Kong
Assuming the 90 days trading horizon Taichung Commercial is expected to generate 3.45 times less return on investment than Shin Kong. But when comparing it to its historical volatility, Taichung Commercial Bank is 1.1 times less risky than Shin Kong. It trades about 0.1 of its potential returns per unit of risk. Shin Kong Financial is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,185 in Shin Kong Financial on October 26, 2024 and sell it today you would earn a total of 45.00 from holding Shin Kong Financial or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taichung Commercial Bank vs. Shin Kong Financial
Performance |
| Timeline |
| Taichung Commercial Bank |
| Shin Kong Financial |
Taichung Commercial and Shin Kong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taichung Commercial and Shin Kong
The main advantage of trading using opposite Taichung Commercial and Shin Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taichung Commercial 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.| Taichung Commercial vs. Taiwan Business Bank | Taichung Commercial vs. Taishin Financial Holding | Taichung Commercial vs. Hua Nan Financial | Taichung Commercial vs. ESUN Financial Holding |
| Shin Kong vs. Cathay Financial Holding | Shin Kong vs. Taishin Financial Holding | Shin Kong vs. Fubon Financial Holding | Shin Kong vs. CTBC Financial Holding |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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