Correlation Between Great Wall and Taiwan Fertilizer
Can any of the company-specific risk be diversified away by investing in both Great Wall and Taiwan Fertilizer 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 Taiwan Fertilizer 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 Taiwan Fertilizer Co, you can compare the effects of market volatilities on Great Wall and Taiwan Fertilizer 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 Taiwan Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Taiwan Fertilizer.
Diversification Opportunities for Great Wall and Taiwan Fertilizer
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Great and Taiwan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Taiwan Fertilizer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Fertilizer 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 Taiwan Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Fertilizer has no effect on the direction of Great Wall i.e., Great Wall and Taiwan Fertilizer go up and down completely randomly.
Pair Corralation between Great Wall and Taiwan Fertilizer
Assuming the 90 days trading horizon Great Wall Enterprise is expected to generate 0.78 times more return on investment than Taiwan Fertilizer. However, Great Wall Enterprise is 1.28 times less risky than Taiwan Fertilizer. It trades about 0.67 of its potential returns per unit of risk. Taiwan Fertilizer Co is currently generating about 0.3 per unit of risk. If you would invest 5,270 in Great Wall Enterprise on November 27, 2024 and sell it today you would earn a total of 390.00 from holding Great Wall Enterprise or generate 7.4% 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. Taiwan Fertilizer Co
Performance |
| Timeline |
| Great Wall Enterprise |
| Taiwan Fertilizer |
Great Wall and Taiwan Fertilizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Taiwan Fertilizer
The main advantage of trading using opposite Great Wall and Taiwan Fertilizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Taiwan Fertilizer 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 Taiwan Fertilizer will offset losses from the drop in Taiwan Fertilizer's long position.| Great Wall vs. Charoen Pokphand Enterprise | Great Wall vs. Uni President Enterprises Corp | Great Wall vs. Lien Hwa Industrial | Great Wall vs. Standard Foods Corp |
| Taiwan Fertilizer vs. Taiwan Cement Corp | Taiwan Fertilizer vs. Far Eastern New | Taiwan Fertilizer vs. Asia Cement Corp | Taiwan Fertilizer vs. Formosa Plastics 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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