Correlation Between Tainan Spinning and Hotai
Can any of the company-specific risk be diversified away by investing in both Tainan Spinning and Hotai 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 Hotai 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 Hotai Motor Co, you can compare the effects of market volatilities on Tainan Spinning and Hotai 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 Hotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and Hotai.
Diversification Opportunities for Tainan Spinning and Hotai
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tainan and Hotai is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Hotai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotai Motor 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 Hotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotai Motor has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Hotai go up and down completely randomly.
Pair Corralation between Tainan Spinning and Hotai
Assuming the 90 days trading horizon Tainan Spinning Co is expected to generate 0.61 times more return on investment than Hotai. However, Tainan Spinning Co is 1.63 times less risky than Hotai. It trades about -0.07 of its potential returns per unit of risk. Hotai Motor Co is currently generating about -0.19 per unit of risk. If you would invest 1,540 in Tainan Spinning Co on August 29, 2024 and sell it today you would lose (25.00) from holding Tainan Spinning Co or give up 1.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tainan Spinning Co vs. Hotai Motor Co
Performance |
| Timeline |
| Tainan Spinning |
| Hotai Motor |
Tainan Spinning and Hotai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tainan Spinning and Hotai
The main advantage of trading using opposite Tainan Spinning and Hotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainan Spinning position performs unexpectedly, Hotai 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 Hotai will offset losses from the drop in Hotai's long position.| Tainan Spinning vs. Yulon Finance Corp | Tainan Spinning vs. Taiwan Secom Co | Tainan Spinning vs. Pou Chen Corp | Tainan Spinning vs. Great Wall Enterprise |
| Hotai vs. Yulon Finance Corp | Hotai vs. Taiwan Secom Co | Hotai vs. Pou Chen Corp | Hotai vs. Great Wall Enterprise |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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