Correlation Between Tainan Spinning and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Tainan Spinning and Chung Hwa 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 Tainan Spinning and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tainan Spinning Co and Chung Hwa Pulp, you can compare the effects of market volatilities on Tainan Spinning and Chung Hwa 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 Tainan Spinning with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and Chung Hwa.
Diversification Opportunities for Tainan Spinning and Chung Hwa
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Tainan and Chung is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Chung Hwa Pulp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Pulp and Tainan Spinning 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 Tainan Spinning Co are associated (or correlated) with Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Pulp has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Chung Hwa go up and down completely randomly.
Pair Corralation between Tainan Spinning and Chung Hwa
Assuming the 90 days trading horizon Tainan Spinning Co is expected to generate 0.57 times more return on investment than Chung Hwa. However, Tainan Spinning Co is 1.76 times less risky than Chung Hwa. It trades about -0.05 of its potential returns per unit of risk. Chung Hwa Pulp is currently generating about -0.14 per unit of risk. If you would invest 1,525 in Tainan Spinning Co on September 12, 2024 and sell it today you would lose (15.00) from holding Tainan Spinning Co or give up 0.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tainan Spinning Co vs. Chung Hwa Pulp
Performance |
| Timeline |
| Tainan Spinning |
| Chung Hwa Pulp |
Tainan Spinning and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tainan Spinning and Chung Hwa
The main advantage of trading using opposite Tainan Spinning and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainan Spinning position performs unexpectedly, Chung Hwa 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 Chung Hwa will offset losses from the drop in Chung Hwa's long position.| Tainan Spinning vs. Lealea Enterprise Co | Tainan Spinning vs. China Petrochemical Development | Tainan Spinning vs. Li Peng Enterprise | Tainan Spinning vs. Oriental Union Chemical |
| Chung Hwa vs. Tainan Spinning Co | Chung Hwa vs. Lealea Enterprise Co | Chung Hwa vs. China Petrochemical Development | Chung Hwa vs. Ruentex Development 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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