Correlation Between Chia Her and Taiwan Tea
Can any of the company-specific risk be diversified away by investing in both Chia Her and Taiwan Tea 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 Chia Her and Taiwan Tea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chia Her Industrial and Taiwan Tea Corp, you can compare the effects of market volatilities on Chia Her and Taiwan Tea 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 Chia Her with a short position of Taiwan Tea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Her and Taiwan Tea.
Diversification Opportunities for Chia Her and Taiwan Tea
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chia and Taiwan is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chia Her Industrial and Taiwan Tea Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Tea Corp and Chia Her 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 Chia Her Industrial are associated (or correlated) with Taiwan Tea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Tea Corp has no effect on the direction of Chia Her i.e., Chia Her and Taiwan Tea go up and down completely randomly.
Pair Corralation between Chia Her and Taiwan Tea
Assuming the 90 days trading horizon Chia Her Industrial is expected to generate 3.58 times more return on investment than Taiwan Tea. However, Chia Her is 3.58 times more volatile than Taiwan Tea Corp. It trades about 0.08 of its potential returns per unit of risk. Taiwan Tea Corp is currently generating about -0.04 per unit of risk. If you would invest 2,230 in Chia Her Industrial on September 1, 2024 and sell it today you would earn a total of 145.00 from holding Chia Her Industrial or generate 6.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chia Her Industrial vs. Taiwan Tea Corp
Performance |
| Timeline |
| Chia Her Industrial |
| Taiwan Tea Corp |
Chia Her and Taiwan Tea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chia Her and Taiwan Tea
The main advantage of trading using opposite Chia Her and Taiwan Tea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia Her position performs unexpectedly, Taiwan Tea 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 Taiwan Tea will offset losses from the drop in Taiwan Tea's long position.| Chia Her vs. Carnival Industrial Corp | Chia Her vs. I Hwa Industrial Co | Chia Her vs. Hung Chou Fiber | Chia Her vs. Tung Ho Textile |
| Taiwan Tea vs. De Licacy Industrial | Taiwan Tea vs. Wisher Industrial Co | Taiwan Tea vs. Tainan Enterprises 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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