Correlation Between Shin Zu and Cheng Fwa
Can any of the company-specific risk be diversified away by investing in both Shin Zu and Cheng Fwa 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 Cheng Fwa 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 Cheng Fwa Industrial, you can compare the effects of market volatilities on Shin Zu and Cheng Fwa 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 Cheng Fwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Zu and Cheng Fwa.
Diversification Opportunities for Shin Zu and Cheng Fwa
Very good diversification
The 3 months correlation between Shin and Cheng is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shin Zu Shing and Cheng Fwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Fwa Industrial 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 Cheng Fwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Fwa Industrial has no effect on the direction of Shin Zu i.e., Shin Zu and Cheng Fwa go up and down completely randomly.
Pair Corralation between Shin Zu and Cheng Fwa
Assuming the 90 days trading horizon Shin Zu is expected to generate 6.26 times less return on investment than Cheng Fwa. But when comparing it to its historical volatility, Shin Zu Shing is 1.1 times less risky than Cheng Fwa. It trades about 0.02 of its potential returns per unit of risk. Cheng Fwa Industrial is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,690 in Cheng Fwa Industrial on September 12, 2024 and sell it today you would earn a total of 640.00 from holding Cheng Fwa Industrial or generate 23.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shin Zu Shing vs. Cheng Fwa Industrial
Performance |
| Timeline |
| Shin Zu Shing |
| Cheng Fwa Industrial |
Shin Zu and Cheng Fwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin Zu and Cheng Fwa
The main advantage of trading using opposite Shin Zu and Cheng Fwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Zu position performs unexpectedly, Cheng Fwa 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 Cheng Fwa will offset losses from the drop in Cheng Fwa's long position.| Shin Zu vs. Yang Ming Marine | Shin Zu vs. Wan Hai Lines | Shin Zu vs. U Ming Marine Transport | Shin Zu vs. Taiwan Navigation Co |
| Cheng Fwa vs. FDC International Hotels | Cheng Fwa vs. Formosa International Hotels | Cheng Fwa vs. FarGlory Hotel Co | Cheng Fwa vs. STL Technology Co |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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