Correlation Between Great Wall and Taiwan Tea
Can any of the company-specific risk be diversified away by investing in both Great Wall and Taiwan Tea 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 Tea 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 Tea Corp, you can compare the effects of market volatilities on Great Wall and Taiwan Tea 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 Tea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Taiwan Tea.
Diversification Opportunities for Great Wall and Taiwan Tea
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Great and Taiwan is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Taiwan Tea Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Tea Corp 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 Tea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Tea Corp has no effect on the direction of Great Wall i.e., Great Wall and Taiwan Tea go up and down completely randomly.
Pair Corralation between Great Wall and Taiwan Tea
Assuming the 90 days trading horizon Great Wall Enterprise is expected to under-perform the Taiwan Tea. But the stock apears to be less risky and, when comparing its historical volatility, Great Wall Enterprise is 1.72 times less risky than Taiwan Tea. The stock trades about -0.05 of its potential returns per unit of risk. The Taiwan Tea Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,140 in Taiwan Tea Corp on September 1, 2024 and sell it today you would lose (80.00) from holding Taiwan Tea Corp or give up 3.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Great Wall Enterprise vs. Taiwan Tea Corp
Performance |
| Timeline |
| Great Wall Enterprise |
| Taiwan Tea Corp |
Great Wall and Taiwan Tea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Taiwan Tea
The main advantage of trading using opposite Great Wall and Taiwan Tea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Taiwan Tea 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 Tea will offset losses from the drop in Taiwan Tea's long position.| Great Wall vs. De Licacy Industrial | Great Wall vs. Wisher Industrial Co | Great Wall vs. Tainan Enterprises Co |
| Taiwan Tea vs. De Licacy Industrial | Taiwan Tea vs. Wisher Industrial Co | Taiwan Tea vs. Tainan Enterprises Co |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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