Correlation Between China Metal and Taiwan Takisawa
Can any of the company-specific risk be diversified away by investing in both China Metal and Taiwan Takisawa 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 China Metal and Taiwan Takisawa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Metal Products and Taiwan Takisawa Technology, you can compare the effects of market volatilities on China Metal and Taiwan Takisawa 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 China Metal with a short position of Taiwan Takisawa. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Taiwan Takisawa.
Diversification Opportunities for China Metal and Taiwan Takisawa
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Taiwan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Taiwan Takisawa Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Takisawa Tech and China Metal 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 China Metal Products are associated (or correlated) with Taiwan Takisawa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Takisawa Tech has no effect on the direction of China Metal i.e., China Metal and Taiwan Takisawa go up and down completely randomly.
Pair Corralation between China Metal and Taiwan Takisawa
Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Taiwan Takisawa. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 1.51 times less risky than Taiwan Takisawa. The stock trades about -0.02 of its potential returns per unit of risk. The Taiwan Takisawa Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,180 in Taiwan Takisawa Technology on September 4, 2024 and sell it today you would earn a total of 5,030 from holding Taiwan Takisawa Technology or generate 158.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Metal Products vs. Taiwan Takisawa Technology
Performance |
| Timeline |
| China Metal Products |
| Taiwan Takisawa Tech |
China Metal and Taiwan Takisawa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Metal and Taiwan Takisawa
The main advantage of trading using opposite China Metal and Taiwan Takisawa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, Taiwan Takisawa 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 Takisawa will offset losses from the drop in Taiwan Takisawa's long position.The idea behind China Metal Products and Taiwan Takisawa Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Taiwan Takisawa vs. Hon Hai Precision | Taiwan Takisawa vs. Delta Electronics | Taiwan Takisawa vs. LARGAN Precision Co | Taiwan Takisawa vs. AU Optronics |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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