Correlation Between Great Wall and Tainan Spinning
Can any of the company-specific risk be diversified away by investing in both Great Wall and Tainan Spinning 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 Great Wall and Tainan Spinning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Enterprise and Tainan Spinning Co, you can compare the effects of market volatilities on Great Wall and Tainan Spinning 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 Great Wall with a short position of Tainan Spinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Tainan Spinning.
Diversification Opportunities for Great Wall and Tainan Spinning
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Great and Tainan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Tainan Spinning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Spinning and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Tainan Spinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Spinning has no effect on the direction of Great Wall i.e., Great Wall and Tainan Spinning go up and down completely randomly.
Pair Corralation between Great Wall and Tainan Spinning
Assuming the 90 days trading horizon Great Wall Enterprise is expected to generate 0.63 times more return on investment than Tainan Spinning. However, Great Wall Enterprise is 1.58 times less risky than Tainan Spinning. It trades about 0.31 of its potential returns per unit of risk. Tainan Spinning Co is currently generating about -0.07 per unit of risk. If you would invest 5,110 in Great Wall Enterprise on August 29, 2024 and sell it today you would earn a total of 210.00 from holding Great Wall Enterprise or generate 4.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wall Enterprise vs. Tainan Spinning Co
Performance |
| Timeline |
| Great Wall Enterprise |
| Tainan Spinning |
Great Wall and Tainan Spinning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Tainan Spinning
The main advantage of trading using opposite Great Wall and Tainan Spinning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Tainan Spinning 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 Tainan Spinning will offset losses from the drop in Tainan Spinning's long position.The idea behind Great Wall Enterprise and Tainan Spinning Co 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.| Tainan Spinning vs. Yulon Finance Corp | Tainan Spinning vs. Taiwan Secom Co | Tainan Spinning vs. Pou Chen Corp | Tainan Spinning vs. Great Wall Enterprise |
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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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