Correlation Between Wei Chuan and Mega Financial
Can any of the company-specific risk be diversified away by investing in both Wei Chuan and Mega Financial 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 Wei Chuan and Mega Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wei Chuan Foods and Mega Financial Holding, you can compare the effects of market volatilities on Wei Chuan and Mega Financial 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 Wei Chuan with a short position of Mega Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wei Chuan and Mega Financial.
Diversification Opportunities for Wei Chuan and Mega Financial
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Wei and Mega is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wei Chuan Foods and Mega Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Financial Holding and Wei Chuan 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 Wei Chuan Foods are associated (or correlated) with Mega Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Financial Holding has no effect on the direction of Wei Chuan i.e., Wei Chuan and Mega Financial go up and down completely randomly.
Pair Corralation between Wei Chuan and Mega Financial
Assuming the 90 days trading horizon Wei Chuan is expected to generate 1.1 times less return on investment than Mega Financial. But when comparing it to its historical volatility, Wei Chuan Foods is 1.51 times less risky than Mega Financial. It trades about 0.19 of its potential returns per unit of risk. Mega Financial Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,910 in Mega Financial Holding on August 30, 2024 and sell it today you would earn a total of 95.00 from holding Mega Financial Holding or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wei Chuan Foods vs. Mega Financial Holding
Performance |
| Timeline |
| Wei Chuan Foods |
| Mega Financial Holding |
Wei Chuan and Mega Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wei Chuan and Mega Financial
The main advantage of trading using opposite Wei Chuan and Mega Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wei Chuan position performs unexpectedly, Mega Financial 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 Mega Financial will offset losses from the drop in Mega Financial's long position.The idea behind Wei Chuan Foods and Mega Financial Holding 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.| Mega Financial vs. Taiwan Secom Co | Mega Financial vs. TTET Union Corp | Mega Financial vs. China Steel Chemical | Mega Financial vs. Taiwan Shin Kong |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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