Correlation Between Shin Kong and LandMark Optoelectronics
Can any of the company-specific risk be diversified away by investing in both Shin Kong and LandMark Optoelectronics 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 LandMark Optoelectronics 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 LandMark Optoelectronics, you can compare the effects of market volatilities on Shin Kong and LandMark Optoelectronics 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 LandMark Optoelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Kong and LandMark Optoelectronics.
Diversification Opportunities for Shin Kong and LandMark Optoelectronics
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Shin and LandMark is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and LandMark Optoelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LandMark Optoelectronics 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 LandMark Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LandMark Optoelectronics has no effect on the direction of Shin Kong i.e., Shin Kong and LandMark Optoelectronics go up and down completely randomly.
Pair Corralation between Shin Kong and LandMark Optoelectronics
Assuming the 90 days trading horizon Shin Kong is expected to generate 4.02 times less return on investment than LandMark Optoelectronics. But when comparing it to its historical volatility, Shin Kong Financial is 2.34 times less risky than LandMark Optoelectronics. It trades about 0.05 of its potential returns per unit of risk. LandMark Optoelectronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11,713 in LandMark Optoelectronics on September 2, 2024 and sell it today you would earn a total of 22,587 from holding LandMark Optoelectronics or generate 192.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shin Kong Financial vs. LandMark Optoelectronics
Performance |
| Timeline |
| Shin Kong Financial |
| LandMark Optoelectronics |
Shin Kong and LandMark Optoelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin Kong and LandMark Optoelectronics
The main advantage of trading using opposite Shin Kong and LandMark Optoelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Kong position performs unexpectedly, LandMark Optoelectronics 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 LandMark Optoelectronics will offset losses from the drop in LandMark Optoelectronics' long position.The idea behind Shin Kong Financial and LandMark Optoelectronics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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