Correlation Between Taiwan Cement and Cheng Shin
Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and Cheng Shin 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 Cheng Shin 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 Cheng Shin Rubber, you can compare the effects of market volatilities on Taiwan Cement and Cheng Shin 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 Cheng Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Cheng Shin.
Diversification Opportunities for Taiwan Cement and Cheng Shin
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Cheng is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Cheng Shin Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Shin Rubber 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 Cheng Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Shin Rubber has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Cheng Shin go up and down completely randomly.
Pair Corralation between Taiwan Cement and Cheng Shin
Assuming the 90 days trading horizon Taiwan Cement Corp is expected to under-perform the Cheng Shin. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Cement Corp is 1.66 times less risky than Cheng Shin. The stock trades about -0.02 of its potential returns per unit of risk. The Cheng Shin Rubber is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,455 in Cheng Shin Rubber on October 25, 2024 and sell it today you would earn a total of 1,510 from holding Cheng Shin Rubber or generate 43.7% 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. Cheng Shin Rubber
Performance |
| Timeline |
| Taiwan Cement Corp |
| Cheng Shin Rubber |
Taiwan Cement and Cheng Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cement and Cheng Shin
The main advantage of trading using opposite Taiwan Cement and Cheng Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cement position performs unexpectedly, Cheng Shin 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 Cheng Shin will offset losses from the drop in Cheng Shin'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 |
| Cheng Shin vs. Uni President Enterprises Corp | Cheng Shin vs. Formosa Chemicals Fibre | Cheng Shin vs. Asia Cement Corp | Cheng Shin vs. Pou Chen 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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