Correlation Between Shin Zu and S Tech
Can any of the company-specific risk be diversified away by investing in both Shin Zu and S Tech 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 Zu and S Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shin Zu Shing and S Tech Corp, you can compare the effects of market volatilities on Shin Zu and S Tech 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 Zu with a short position of S Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Zu and S Tech.
Diversification Opportunities for Shin Zu and S Tech
Average diversification
The 3 months correlation between Shin and 1584 is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Shin Zu Shing and S Tech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S Tech Corp and Shin Zu 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 Zu Shing are associated (or correlated) with S Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S Tech Corp has no effect on the direction of Shin Zu i.e., Shin Zu and S Tech go up and down completely randomly.
Pair Corralation between Shin Zu and S Tech
Assuming the 90 days trading horizon Shin Zu Shing is expected to generate 2.12 times more return on investment than S Tech. However, Shin Zu is 2.12 times more volatile than S Tech Corp. It trades about 0.17 of its potential returns per unit of risk. S Tech Corp is currently generating about -0.15 per unit of risk. If you would invest 17,250 in Shin Zu Shing on November 9, 2024 and sell it today you would earn a total of 6,250 from holding Shin Zu Shing or generate 36.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shin Zu Shing vs. S Tech Corp
Performance |
| Timeline |
| Shin Zu Shing |
Risk-Adjusted Performance
Good
Weak | Strong |
| S Tech Corp |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Shin Zu and S Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin Zu and S Tech
The main advantage of trading using opposite Shin Zu and S Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Zu position performs unexpectedly, S Tech 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 S Tech will offset losses from the drop in S Tech's long position.The idea behind Shin Zu Shing and S Tech Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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