Correlation Between Taiwan Cement and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and Chung Hwa 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 Chung Hwa 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 Chung Hwa Chemical, you can compare the effects of market volatilities on Taiwan Cement and Chung Hwa 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 Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Chung Hwa.
Diversification Opportunities for Taiwan Cement and Chung Hwa
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Taiwan and Chung is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Chung Hwa Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Chemical 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 Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Chemical has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Chung Hwa go up and down completely randomly.
Pair Corralation between Taiwan Cement and Chung Hwa
Assuming the 90 days trading horizon Taiwan Cement is expected to generate 23.38 times less return on investment than Chung Hwa. But when comparing it to its historical volatility, Taiwan Cement Corp is 2.64 times less risky than Chung Hwa. It trades about 0.0 of its potential returns per unit of risk. Chung Hwa Chemical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,738 in Chung Hwa Chemical on August 30, 2024 and sell it today you would earn a total of 707.00 from holding Chung Hwa Chemical or generate 25.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Taiwan Cement Corp vs. Chung Hwa Chemical
Performance |
| Timeline |
| Taiwan Cement Corp |
| Chung Hwa Chemical |
Taiwan Cement and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cement and Chung Hwa
The main advantage of trading using opposite Taiwan Cement and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cement position performs unexpectedly, Chung Hwa 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 Chung Hwa will offset losses from the drop in Chung Hwa'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 |
| Chung Hwa vs. Oriental Union Chemical | Chung Hwa vs. Everlight Chemical Industrial | Chung Hwa vs. Formosan Union Chemical | Chung Hwa vs. Sesoda 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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