Correlation Between Taiwan Cement and CHC Resources
Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and CHC Resources 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 CHC Resources 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 CHC Resources Corp, you can compare the effects of market volatilities on Taiwan Cement and CHC Resources 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 CHC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and CHC Resources.
Diversification Opportunities for Taiwan Cement and CHC Resources
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Taiwan and CHC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and CHC Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Resources 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 CHC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Resources Corp has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and CHC Resources go up and down completely randomly.
Pair Corralation between Taiwan Cement and CHC Resources
Assuming the 90 days trading horizon Taiwan Cement Corp is expected to generate 1.29 times more return on investment than CHC Resources. However, Taiwan Cement is 1.29 times more volatile than CHC Resources Corp. It trades about 0.27 of its potential returns per unit of risk. CHC Resources Corp is currently generating about -0.11 per unit of risk. If you would invest 3,215 in Taiwan Cement Corp on August 29, 2024 and sell it today you would earn a total of 165.00 from holding Taiwan Cement Corp or generate 5.13% 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. CHC Resources Corp
Performance |
| Timeline |
| Taiwan Cement Corp |
| CHC Resources Corp |
Taiwan Cement and CHC Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cement and CHC Resources
The main advantage of trading using opposite Taiwan Cement and CHC Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cement position performs unexpectedly, CHC Resources 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 CHC Resources will offset losses from the drop in CHC Resources' long position.| Taiwan Cement vs. Cheng Shin Rubber | Taiwan Cement vs. China Steel Chemical | Taiwan Cement vs. Yulon Motor Co |
| CHC Resources vs. China Steel Chemical | CHC Resources vs. Taiwan Secom Co | CHC Resources vs. Nak Sealing Technologies | CHC Resources vs. Sinyi Realty |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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