Correlation Between Tainan Spinning and Great Taipei
Can any of the company-specific risk be diversified away by investing in both Tainan Spinning and Great Taipei 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 Great Taipei 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 Great Taipei Gas, you can compare the effects of market volatilities on Tainan Spinning and Great Taipei 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 Great Taipei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and Great Taipei.
Diversification Opportunities for Tainan Spinning and Great Taipei
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tainan and Great is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Great Taipei Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Taipei Gas 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 Great Taipei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Taipei Gas has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Great Taipei go up and down completely randomly.
Pair Corralation between Tainan Spinning and Great Taipei
Assuming the 90 days trading horizon Tainan Spinning Co is expected to under-perform the Great Taipei. In addition to that, Tainan Spinning is 2.85 times more volatile than Great Taipei Gas. It trades about -0.12 of its total potential returns per unit of risk. Great Taipei Gas is currently generating about 0.06 per unit of volatility. If you would invest 3,015 in Great Taipei Gas on September 4, 2024 and sell it today you would earn a total of 10.00 from holding Great Taipei Gas or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tainan Spinning Co vs. Great Taipei Gas
Performance |
| Timeline |
| Tainan Spinning |
| Great Taipei Gas |
Tainan Spinning and Great Taipei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tainan Spinning and Great Taipei
The main advantage of trading using opposite Tainan Spinning and Great Taipei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainan Spinning position performs unexpectedly, Great Taipei 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 Great Taipei will offset losses from the drop in Great Taipei'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 |
| Great Taipei vs. Taiwan Secom Co | Great Taipei vs. Taiwan Shin Kong | Great Taipei vs. Taiwan Cogeneration Corp | Great Taipei vs. Shin Shin Natural |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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