Correlation Between ESUN Financial and Shin Kong
Can any of the company-specific risk be diversified away by investing in both ESUN Financial 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 ESUN Financial and Shin Kong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESUN Financial Holding and Shin Kong Financial, you can compare the effects of market volatilities on ESUN Financial 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 ESUN Financial with a short position of Shin Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Shin Kong.
Diversification Opportunities for ESUN Financial and Shin Kong
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ESUN and Shin is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding 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 ESUN Financial 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 ESUN Financial Holding 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 ESUN Financial i.e., ESUN Financial and Shin Kong go up and down completely randomly.
Pair Corralation between ESUN Financial and Shin Kong
Assuming the 90 days trading horizon ESUN Financial is expected to generate 2.88 times less return on investment than Shin Kong. But when comparing it to its historical volatility, ESUN Financial Holding is 1.67 times less risky than Shin Kong. It trades about 0.06 of its potential returns per unit of risk. Shin Kong Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 840.00 in Shin Kong Financial on August 28, 2024 and sell it today you would earn a total of 335.00 from holding Shin Kong Financial or generate 39.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESUN Financial Holding vs. Shin Kong Financial
Performance |
| Timeline |
| ESUN Financial Holding |
| Shin Kong Financial |
ESUN Financial and Shin Kong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESUN Financial and Shin Kong
The main advantage of trading using opposite ESUN Financial and Shin Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESUN Financial 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.| ESUN Financial vs. Mega Financial Holding | ESUN Financial vs. CTBC Financial Holding | ESUN Financial vs. First Financial Holding | ESUN Financial vs. Fubon 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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