Correlation Between Sino American and Kao Fong
Can any of the company-specific risk be diversified away by investing in both Sino American and Kao Fong 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 Sino American and Kao Fong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sino American Silicon Products and Kao Fong Machinery, you can compare the effects of market volatilities on Sino American and Kao Fong 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 Sino American with a short position of Kao Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sino American and Kao Fong.
Diversification Opportunities for Sino American and Kao Fong
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sino and Kao is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sino American Silicon Products and Kao Fong Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Fong Machinery and Sino American 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 Sino American Silicon Products are associated (or correlated) with Kao Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Fong Machinery has no effect on the direction of Sino American i.e., Sino American and Kao Fong go up and down completely randomly.
Pair Corralation between Sino American and Kao Fong
Assuming the 90 days trading horizon Sino American Silicon Products is expected to under-perform the Kao Fong. But the stock apears to be less risky and, when comparing its historical volatility, Sino American Silicon Products is 1.77 times less risky than Kao Fong. The stock trades about -0.33 of its potential returns per unit of risk. The Kao Fong Machinery is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,290 in Kao Fong Machinery on October 11, 2024 and sell it today you would earn a total of 135.00 from holding Kao Fong Machinery or generate 3.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sino American Silicon Products vs. Kao Fong Machinery
Performance |
| Timeline |
| Sino American Silicon |
| Kao Fong Machinery |
Sino American and Kao Fong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sino American and Kao Fong
The main advantage of trading using opposite Sino American and Kao Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino American position performs unexpectedly, Kao Fong 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 Kao Fong will offset losses from the drop in Kao Fong's long position.| Sino American vs. GlobalWafers Co | Sino American vs. Wafer Works | Sino American vs. Motech Industries Co | Sino American vs. WIN Semiconductors |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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