Correlation Between Taiwan Cement and Chia Hsin
Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and Chia Hsin 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 Taiwan Cement and Chia Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Cement Corp and Chia Hsin Cement, you can compare the effects of market volatilities on Taiwan Cement and Chia Hsin 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 Taiwan Cement with a short position of Chia Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Chia Hsin.
Diversification Opportunities for Taiwan Cement and Chia Hsin
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Chia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Chia Hsin Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Hsin Cement and Taiwan Cement 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 Taiwan Cement Corp are associated (or correlated) with Chia Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Hsin Cement has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Chia Hsin go up and down completely randomly.
Pair Corralation between Taiwan Cement and Chia Hsin
Assuming the 90 days trading horizon Taiwan Cement Corp is expected to generate 1.11 times more return on investment than Chia Hsin. However, Taiwan Cement is 1.11 times more volatile than Chia Hsin Cement. It trades about 0.25 of its potential returns per unit of risk. Chia Hsin Cement is currently generating about 0.11 per unit of risk. If you would invest 3,195 in Taiwan Cement Corp on September 1, 2024 and sell it today you would earn a total of 155.00 from holding Taiwan Cement Corp or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Taiwan Cement Corp vs. Chia Hsin Cement
Performance |
| Timeline |
| Taiwan Cement Corp |
| Chia Hsin Cement |
Taiwan Cement and Chia Hsin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cement and Chia Hsin
The main advantage of trading using opposite Taiwan Cement and Chia Hsin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cement position performs unexpectedly, Chia Hsin 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 Chia Hsin will offset losses from the drop in Chia Hsin's long position.| Taiwan Cement vs. Asia Cement Corp | Taiwan Cement vs. Formosa Plastics Corp | Taiwan Cement vs. Nan Ya Plastics | Taiwan Cement vs. China Steel Corp |
| Chia Hsin vs. Basso Industry Corp | Chia Hsin vs. Chung Hsin Electric Machinery | Chia Hsin vs. TYC Brother Industrial | Chia Hsin vs. TECO Electric Machinery |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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