Correlation Between Taiwan Cement and Uni President
Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and Uni President 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 Uni President 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 Uni President Enterprises Corp, you can compare the effects of market volatilities on Taiwan Cement and Uni President 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 Uni President. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Uni President.
Diversification Opportunities for Taiwan Cement and Uni President
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Taiwan and Uni is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Uni President Enterprises Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uni President Enterp 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 Uni President. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uni President Enterp has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Uni President go up and down completely randomly.
Pair Corralation between Taiwan Cement and Uni President
Assuming the 90 days trading horizon Taiwan Cement Corp is expected to under-perform the Uni President. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Cement Corp is 1.03 times less risky than Uni President. The stock trades about -0.02 of its potential returns per unit of risk. The Uni President Enterprises Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,413 in Uni President Enterprises Corp on November 19, 2024 and sell it today you would earn a total of 1,677 from holding Uni President Enterprises Corp or generate 26.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Taiwan Cement Corp vs. Uni President Enterprises Corp
Performance |
| Timeline |
| Taiwan Cement Corp |
| Uni President Enterp |
Taiwan Cement and Uni President Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cement and Uni President
The main advantage of trading using opposite Taiwan Cement and Uni President positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cement position performs unexpectedly, Uni President 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 Uni President will offset losses from the drop in Uni President'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 |
| Uni President vs. President Chain Store | Uni President vs. Formosa Plastics Corp | Uni President vs. Nan Ya Plastics | Uni President vs. Taiwan Cement Corp |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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