Correlation Between China General and Tainan Spinning
Can any of the company-specific risk be diversified away by investing in both China General 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 China General and Tainan Spinning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China General Plastics and Tainan Spinning Co, you can compare the effects of market volatilities on China General 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 China General with a short position of Tainan Spinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of China General and Tainan Spinning.
Diversification Opportunities for China General and Tainan Spinning
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Tainan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding China General Plastics and Tainan Spinning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Spinning and China General 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 China General Plastics 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 China General i.e., China General and Tainan Spinning go up and down completely randomly.
Pair Corralation between China General and Tainan Spinning
Assuming the 90 days trading horizon China General Plastics is expected to under-perform the Tainan Spinning. But the stock apears to be less risky and, when comparing its historical volatility, China General Plastics is 1.06 times less risky than Tainan Spinning. The stock trades about -0.12 of its potential returns per unit of risk. The Tainan Spinning Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,595 in Tainan Spinning Co on September 12, 2024 and sell it today you would lose (65.00) from holding Tainan Spinning Co or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China General Plastics vs. Tainan Spinning Co
Performance |
| Timeline |
| China General Plastics |
| Tainan Spinning |
China General and Tainan Spinning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China General and Tainan Spinning
The main advantage of trading using opposite China General and Tainan Spinning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China General 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.| China General vs. Tainan Spinning Co | China General vs. Lealea Enterprise Co | China General vs. China Petrochemical Development | China General vs. Ruentex Development Co |
| Tainan Spinning vs. Lealea Enterprise Co | Tainan Spinning vs. China Petrochemical Development | Tainan Spinning vs. Li Peng Enterprise | Tainan Spinning vs. Oriental Union Chemical |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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