Correlation Between Tainan Enterprises and Taiwan Styrene
Can any of the company-specific risk be diversified away by investing in both Tainan Enterprises and Taiwan Styrene 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 Enterprises and Taiwan Styrene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tainan Enterprises Co and Taiwan Styrene Monomer, you can compare the effects of market volatilities on Tainan Enterprises and Taiwan Styrene 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 Enterprises with a short position of Taiwan Styrene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Enterprises and Taiwan Styrene.
Diversification Opportunities for Tainan Enterprises and Taiwan Styrene
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tainan and Taiwan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Enterprises Co and Taiwan Styrene Monomer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Styrene Monomer and Tainan Enterprises 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 Enterprises Co are associated (or correlated) with Taiwan Styrene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Styrene Monomer has no effect on the direction of Tainan Enterprises i.e., Tainan Enterprises and Taiwan Styrene go up and down completely randomly.
Pair Corralation between Tainan Enterprises and Taiwan Styrene
Assuming the 90 days trading horizon Tainan Enterprises Co is expected to generate 0.86 times more return on investment than Taiwan Styrene. However, Tainan Enterprises Co is 1.17 times less risky than Taiwan Styrene. It trades about -0.16 of its potential returns per unit of risk. Taiwan Styrene Monomer is currently generating about -0.21 per unit of risk. If you would invest 3,685 in Tainan Enterprises Co on September 1, 2024 and sell it today you would lose (135.00) from holding Tainan Enterprises Co or give up 3.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tainan Enterprises Co vs. Taiwan Styrene Monomer
Performance |
| Timeline |
| Tainan Enterprises |
| Taiwan Styrene Monomer |
Tainan Enterprises and Taiwan Styrene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tainan Enterprises and Taiwan Styrene
The main advantage of trading using opposite Tainan Enterprises and Taiwan Styrene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainan Enterprises position performs unexpectedly, Taiwan Styrene 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 Styrene will offset losses from the drop in Taiwan Styrene's long position.| Tainan Enterprises vs. Chaintech Technology Corp | Tainan Enterprises vs. AVerMedia Technologies | Tainan Enterprises vs. Avision | Tainan Enterprises vs. Clevo Co |
| 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 |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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