Correlation Between Taiwan Cement and Taiwan Fertilizer
Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and Taiwan Fertilizer 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 Taiwan Fertilizer 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 Taiwan Fertilizer Co, you can compare the effects of market volatilities on Taiwan Cement and Taiwan Fertilizer 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 Taiwan Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Taiwan Fertilizer.
Diversification Opportunities for Taiwan Cement and Taiwan Fertilizer
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Taiwan and Taiwan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Taiwan Fertilizer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Fertilizer 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 Taiwan Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Fertilizer has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Taiwan Fertilizer go up and down completely randomly.
Pair Corralation between Taiwan Cement and Taiwan Fertilizer
Assuming the 90 days trading horizon Taiwan Cement Corp is expected to generate 0.87 times more return on investment than Taiwan Fertilizer. However, Taiwan Cement Corp is 1.15 times less risky than Taiwan Fertilizer. It trades about 0.02 of its potential returns per unit of risk. Taiwan Fertilizer Co is currently generating about -0.09 per unit of risk. If you would invest 3,300 in Taiwan Cement Corp on September 1, 2024 and sell it today you would earn a total of 50.00 from holding Taiwan Cement Corp or generate 1.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Taiwan Cement Corp vs. Taiwan Fertilizer Co
Performance |
| Timeline |
| Taiwan Cement Corp |
| Taiwan Fertilizer |
Taiwan Cement and Taiwan Fertilizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cement and Taiwan Fertilizer
The main advantage of trading using opposite Taiwan Cement and Taiwan Fertilizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cement position performs unexpectedly, Taiwan Fertilizer 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 Fertilizer will offset losses from the drop in Taiwan Fertilizer'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 |
| Taiwan Fertilizer vs. Taiwan Cement Corp | Taiwan Fertilizer vs. Far Eastern New | Taiwan Fertilizer vs. Asia Cement Corp | Taiwan Fertilizer vs. Formosa Plastics 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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