Correlation Between Shin Kong and Century Wind
Can any of the company-specific risk be diversified away by investing in both Shin Kong and Century Wind 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 Century Wind 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 Century Wind Power, you can compare the effects of market volatilities on Shin Kong and Century Wind 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 Century Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Kong and Century Wind.
Diversification Opportunities for Shin Kong and Century Wind
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Shin and Century is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and Century Wind Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Wind Power 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 Century Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Wind Power has no effect on the direction of Shin Kong i.e., Shin Kong and Century Wind go up and down completely randomly.
Pair Corralation between Shin Kong and Century Wind
Assuming the 90 days trading horizon Shin Kong Financial is expected to generate 0.15 times more return on investment than Century Wind. However, Shin Kong Financial is 6.73 times less risky than Century Wind. It trades about 0.39 of its potential returns per unit of risk. Century Wind Power is currently generating about -0.16 per unit of risk. If you would invest 1,185 in Shin Kong Financial on November 3, 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shin Kong Financial vs. Century Wind Power
Performance |
| Timeline |
| Shin Kong Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Century Wind Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Shin Kong and Century Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin Kong and Century Wind
The main advantage of trading using opposite Shin Kong and Century Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Kong position performs unexpectedly, Century Wind 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 Century Wind will offset losses from the drop in Century Wind's long position.The idea behind Shin Kong Financial and Century Wind Power 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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