Correlation Between Shin Kong and Lien Chang
Can any of the company-specific risk be diversified away by investing in both Shin Kong and Lien Chang 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 Lien Chang 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 Lien Chang Electronic, you can compare the effects of market volatilities on Shin Kong and Lien Chang 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 Lien Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Kong and Lien Chang.
Diversification Opportunities for Shin Kong and Lien Chang
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Shin and Lien is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic 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 Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of Shin Kong i.e., Shin Kong and Lien Chang go up and down completely randomly.
Pair Corralation between Shin Kong and Lien Chang
Assuming the 90 days trading horizon Shin Kong is expected to generate 1.65 times less return on investment than Lien Chang. But when comparing it to its historical volatility, Shin Kong Financial is 2.68 times less risky than Lien Chang. It trades about 0.12 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,260 in Lien Chang Electronic on September 3, 2024 and sell it today you would earn a total of 335.00 from holding Lien Chang Electronic or generate 26.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shin Kong Financial vs. Lien Chang Electronic
Performance |
| Timeline |
| Shin Kong Financial |
| Lien Chang Electronic |
Shin Kong and Lien Chang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin Kong and Lien Chang
The main advantage of trading using opposite Shin Kong and Lien Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Kong position performs unexpectedly, Lien Chang 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 Lien Chang will offset losses from the drop in Lien Chang's long position.| Shin Kong vs. Lien Chang Electronic | Shin Kong vs. GameSparcs Co | Shin Kong vs. ABC Taiwan Electronics | Shin Kong vs. International Games System |
| Lien Chang vs. Taiwan Semiconductor Manufacturing | Lien Chang vs. Yang Ming Marine | Lien Chang vs. ASE Industrial Holding | Lien Chang vs. AU Optronics |
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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