Correlation Between Shin Kong and Lihtai Construction
Can any of the company-specific risk be diversified away by investing in both Shin Kong and Lihtai Construction 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 Lihtai Construction 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 Lihtai Construction Enterprise, you can compare the effects of market volatilities on Shin Kong and Lihtai Construction 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 Lihtai Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Kong and Lihtai Construction.
Diversification Opportunities for Shin Kong and Lihtai Construction
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shin and Lihtai is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and Lihtai Construction Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lihtai Construction 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 Lihtai Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lihtai Construction has no effect on the direction of Shin Kong i.e., Shin Kong and Lihtai Construction go up and down completely randomly.
Pair Corralation between Shin Kong and Lihtai Construction
Assuming the 90 days trading horizon Shin Kong is expected to generate 2.29 times less return on investment than Lihtai Construction. But when comparing it to its historical volatility, Shin Kong Financial is 3.28 times less risky than Lihtai Construction. It trades about 0.39 of its potential returns per unit of risk. Lihtai Construction Enterprise is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 8,310 in Lihtai Construction Enterprise on December 8, 2024 and sell it today you would earn a total of 380.00 from holding Lihtai Construction Enterprise or generate 4.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shin Kong Financial vs. Lihtai Construction Enterprise
Performance |
| Timeline |
| Shin Kong Financial |
| Lihtai Construction |
Shin Kong and Lihtai Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin Kong and Lihtai Construction
The main advantage of trading using opposite Shin Kong and Lihtai Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Kong position performs unexpectedly, Lihtai Construction 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 Lihtai Construction will offset losses from the drop in Lihtai Construction's long position.| Shin Kong vs. Avalue Technology | ||
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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