Correlation Between Taiwan Cement and Sheng Yu
Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and Sheng Yu 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 Sheng Yu 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 Sheng Yu Steel, you can compare the effects of market volatilities on Taiwan Cement and Sheng Yu 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 Sheng Yu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Sheng Yu.
Diversification Opportunities for Taiwan Cement and Sheng Yu
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Taiwan and Sheng is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Sheng Yu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sheng Yu Steel 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 Sheng Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sheng Yu Steel has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Sheng Yu go up and down completely randomly.
Pair Corralation between Taiwan Cement and Sheng Yu
Assuming the 90 days trading horizon Taiwan Cement is expected to generate 2.93 times less return on investment than Sheng Yu. But when comparing it to its historical volatility, Taiwan Cement Corp is 1.05 times less risky than Sheng Yu. It trades about 0.01 of its potential returns per unit of risk. Sheng Yu Steel is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,355 in Sheng Yu Steel on August 29, 2024 and sell it today you would earn a total of 160.00 from holding Sheng Yu Steel or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Cement Corp vs. Sheng Yu Steel
Performance |
| Timeline |
| Taiwan Cement Corp |
| Sheng Yu Steel |
Taiwan Cement and Sheng Yu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cement and Sheng Yu
The main advantage of trading using opposite Taiwan Cement and Sheng Yu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cement position performs unexpectedly, Sheng Yu 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 Sheng Yu will offset losses from the drop in Sheng Yu'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 |
| Sheng Yu vs. Yieh Phui Enterprise | Sheng Yu vs. Tung Ho Steel | Sheng Yu vs. Feng Hsin Steel | Sheng Yu vs. Chung Hung Steel |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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