Correlation Between Taiwan Styrene and Tainan Enterprises
Can any of the company-specific risk be diversified away by investing in both Taiwan Styrene and Tainan Enterprises 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 Taiwan Styrene and Tainan Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Styrene Monomer and Tainan Enterprises Co, you can compare the effects of market volatilities on Taiwan Styrene and Tainan Enterprises 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 Taiwan Styrene with a short position of Tainan Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Styrene and Tainan Enterprises.
Diversification Opportunities for Taiwan Styrene and Tainan Enterprises
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Tainan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Styrene Monomer and Tainan Enterprises Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Enterprises and Taiwan Styrene 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 Taiwan Styrene Monomer are associated (or correlated) with Tainan Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Enterprises has no effect on the direction of Taiwan Styrene i.e., Taiwan Styrene and Tainan Enterprises go up and down completely randomly.
Pair Corralation between Taiwan Styrene and Tainan Enterprises
Assuming the 90 days trading horizon Taiwan Styrene Monomer is expected to under-perform the Tainan Enterprises. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Styrene Monomer is 1.5 times less risky than Tainan Enterprises. The stock trades about -0.02 of its potential returns per unit of risk. The Tainan Enterprises Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,190 in Tainan Enterprises Co on September 1, 2024 and sell it today you would earn a total of 1,360 from holding Tainan Enterprises Co or generate 62.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Styrene Monomer vs. Tainan Enterprises Co
Performance |
| Timeline |
| Taiwan Styrene Monomer |
| Tainan Enterprises |
Taiwan Styrene and Tainan Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Styrene and Tainan Enterprises
The main advantage of trading using opposite Taiwan Styrene and Tainan Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Styrene position performs unexpectedly, Tainan Enterprises 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 Enterprises will offset losses from the drop in Tainan Enterprises' long position.| Taiwan Styrene vs. Basso Industry Corp | Taiwan Styrene vs. Chung Hsin Electric Machinery | Taiwan Styrene vs. TYC Brother Industrial | Taiwan Styrene vs. TECO Electric Machinery |
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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