Correlation Between Shin Kong and Fortune Electric
Can any of the company-specific risk be diversified away by investing in both Shin Kong and Fortune Electric 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 Shin Kong and Fortune Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shin Kong Financial and Fortune Electric Co, you can compare the effects of market volatilities on Shin Kong and Fortune Electric 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 Shin Kong with a short position of Fortune Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Kong and Fortune Electric.
Diversification Opportunities for Shin Kong and Fortune Electric
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Shin and Fortune is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and Fortune Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Electric and Shin Kong 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 Shin Kong Financial are associated (or correlated) with Fortune Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Electric has no effect on the direction of Shin Kong i.e., Shin Kong and Fortune Electric go up and down completely randomly.
Pair Corralation between Shin Kong and Fortune Electric
Assuming the 90 days trading horizon Shin Kong is expected to generate 7.01 times less return on investment than Fortune Electric. But when comparing it to its historical volatility, Shin Kong Financial is 2.77 times less risky than Fortune Electric. It trades about 0.06 of its potential returns per unit of risk. Fortune Electric Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 5,287 in Fortune Electric Co on November 5, 2024 and sell it today you would earn a total of 51,513 from holding Fortune Electric Co or generate 974.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Shin Kong Financial vs. Fortune Electric Co
Performance |
| Timeline |
| Shin Kong Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Fortune Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Shin Kong and Fortune Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin Kong and Fortune Electric
The main advantage of trading using opposite Shin Kong and Fortune Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Kong position performs unexpectedly, Fortune Electric 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 Fortune Electric will offset losses from the drop in Fortune Electric's long position.The idea behind Shin Kong Financial and Fortune Electric Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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