Correlation Between Hsing Ta and Bank of Kaohsiung
Can any of the company-specific risk be diversified away by investing in both Hsing Ta and Bank of Kaohsiung 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 Hsing Ta and Bank of Kaohsiung into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hsing Ta Cement and Bank of Kaohsiung, you can compare the effects of market volatilities on Hsing Ta and Bank of Kaohsiung 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 Hsing Ta with a short position of Bank of Kaohsiung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsing Ta and Bank of Kaohsiung.
Diversification Opportunities for Hsing Ta and Bank of Kaohsiung
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hsing and Bank is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hsing Ta Cement and Bank of Kaohsiung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Kaohsiung and Hsing Ta 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 Hsing Ta Cement are associated (or correlated) with Bank of Kaohsiung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Kaohsiung has no effect on the direction of Hsing Ta i.e., Hsing Ta and Bank of Kaohsiung go up and down completely randomly.
Pair Corralation between Hsing Ta and Bank of Kaohsiung
Assuming the 90 days trading horizon Hsing Ta Cement is expected to generate 1.15 times more return on investment than Bank of Kaohsiung. However, Hsing Ta is 1.15 times more volatile than Bank of Kaohsiung. It trades about 0.0 of its potential returns per unit of risk. Bank of Kaohsiung is currently generating about -0.01 per unit of risk. If you would invest 1,845 in Hsing Ta Cement on August 28, 2024 and sell it today you would lose (10.00) from holding Hsing Ta Cement or give up 0.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hsing Ta Cement vs. Bank of Kaohsiung
Performance |
| Timeline |
| Hsing Ta Cement |
| Bank of Kaohsiung |
Hsing Ta and Bank of Kaohsiung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hsing Ta and Bank of Kaohsiung
The main advantage of trading using opposite Hsing Ta and Bank of Kaohsiung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hsing Ta position performs unexpectedly, Bank of Kaohsiung 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 Bank of Kaohsiung will offset losses from the drop in Bank of Kaohsiung's long position.The idea behind Hsing Ta Cement and Bank of Kaohsiung pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Bank of Kaohsiung vs. Union Bank of | Bank of Kaohsiung vs. Chang Hwa Commercial | Bank of Kaohsiung vs. EnTie Commercial Bank | Bank of Kaohsiung vs. Taiwan Business Bank |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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