Correlation Between Shin Kong and Taiwan Hon

Can any of the company-specific risk be diversified away by investing in both Shin Kong and Taiwan Hon 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 Taiwan Hon 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 Taiwan Hon Chuan, you can compare the effects of market volatilities on Shin Kong and Taiwan Hon 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 Taiwan Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Kong and Taiwan Hon.

Diversification Opportunities for Shin Kong and Taiwan Hon

-0.86

Correlation Coefficient

Shin Kong  Taiwan Hon

Pay attention - limited upside

The 3 months correlation between Shin and Taiwan is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shin Kong Financial and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan 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 Taiwan Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of Shin Kong i.e., Shin Kong and Taiwan Hon go up and down completely randomly.

Pair Corralation between Shin Kong and Taiwan Hon

Assuming the 90 days trading horizon Shin Kong is expected to generate 4.06 times less return on investment than Taiwan Hon. But when comparing it to its historical volatility, Shin Kong Financial is 2.67 times less risky than Taiwan Hon. It trades about 0.1 of its potential returns per unit of risk. Taiwan Hon Chuan is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  14,750  in Taiwan Hon Chuan on January 26, 2024 and sell it today you would earn a total of  800.00  from holding Taiwan Hon Chuan or generate 5.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Shin Kong Financial  vs.  Taiwan Hon Chuan

Shin Kong Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Kong Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Taiwan Hon Chuan

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Hon Chuan are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Hon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shin Kong and Taiwan Hon

The main advantage of trading using opposite Shin Kong and Taiwan Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Kong position performs unexpectedly, Taiwan Hon 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 Taiwan Hon will offset losses from the drop in Taiwan Hon's long position.

The idea behind Shin Kong Financial and Taiwan Hon Chuan 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.