Correlation Between Taiwan Cement and Walsin Lihwa
Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and Walsin Lihwa 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 Walsin Lihwa 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 Walsin Lihwa Corp, you can compare the effects of market volatilities on Taiwan Cement and Walsin Lihwa 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 Walsin Lihwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Walsin Lihwa.
Diversification Opportunities for Taiwan Cement and Walsin Lihwa
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Walsin is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Walsin Lihwa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walsin Lihwa Corp 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 Walsin Lihwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walsin Lihwa Corp has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Walsin Lihwa go up and down completely randomly.
Pair Corralation between Taiwan Cement and Walsin Lihwa
Assuming the 90 days trading horizon Taiwan Cement is expected to generate 61.21 times less return on investment than Walsin Lihwa. But when comparing it to its historical volatility, Taiwan Cement Corp is 1.38 times less risky than Walsin Lihwa. It trades about 0.01 of its potential returns per unit of risk. Walsin Lihwa Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,335 in Walsin Lihwa Corp on November 5, 2024 and sell it today you would earn a total of 115.00 from holding Walsin Lihwa Corp or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Cement Corp vs. Walsin Lihwa Corp
Performance |
| Timeline |
| Taiwan Cement Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Walsin Lihwa Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Taiwan Cement and Walsin Lihwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cement and Walsin Lihwa
The main advantage of trading using opposite Taiwan Cement and Walsin Lihwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cement position performs unexpectedly, Walsin Lihwa 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 Walsin Lihwa will offset losses from the drop in Walsin Lihwa's long position.The idea behind Taiwan Cement Corp and Walsin Lihwa Corp 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.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |