Correlation Between Standard Foods and Taiwan Fertilizer
Can any of the company-specific risk be diversified away by investing in both Standard Foods 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 Standard Foods and Taiwan Fertilizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Foods Corp and Taiwan Fertilizer Co, you can compare the effects of market volatilities on Standard Foods 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 Standard Foods with a short position of Taiwan Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Foods and Taiwan Fertilizer.
Diversification Opportunities for Standard Foods and Taiwan Fertilizer
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Standard and Taiwan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Standard Foods Corp and Taiwan Fertilizer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Fertilizer and Standard Foods 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 Standard Foods Corp 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 Standard Foods i.e., Standard Foods and Taiwan Fertilizer go up and down completely randomly.
Pair Corralation between Standard Foods and Taiwan Fertilizer
Assuming the 90 days trading horizon Standard Foods Corp is expected to under-perform the Taiwan Fertilizer. But the stock apears to be less risky and, when comparing its historical volatility, Standard Foods Corp is 1.21 times less risky than Taiwan Fertilizer. The stock trades about -0.02 of its potential returns per unit of risk. The Taiwan Fertilizer Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 5,620 in Taiwan Fertilizer Co on September 1, 2024 and sell it today you would lose (30.00) from holding Taiwan Fertilizer Co or give up 0.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.78% |
| Values | Daily Returns |
Standard Foods Corp vs. Taiwan Fertilizer Co
Performance |
| Timeline |
| Standard Foods Corp |
| Taiwan Fertilizer |
Standard Foods and Taiwan Fertilizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Foods and Taiwan Fertilizer
The main advantage of trading using opposite Standard Foods and Taiwan Fertilizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Foods 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.| Standard Foods vs. De Licacy Industrial | Standard Foods vs. Wisher Industrial Co | Standard Foods vs. Tainan Enterprises Co |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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