Correlation Between Walsin Lihwa and Taiwan Cement
Can any of the company-specific risk be diversified away by investing in both Walsin Lihwa and Taiwan Cement 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 Walsin Lihwa and Taiwan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walsin Lihwa Corp and Taiwan Cement Corp, you can compare the effects of market volatilities on Walsin Lihwa and Taiwan Cement 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 Walsin Lihwa with a short position of Taiwan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walsin Lihwa and Taiwan Cement.
Diversification Opportunities for Walsin Lihwa and Taiwan Cement
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Walsin and Taiwan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Lihwa Corp and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and Walsin Lihwa 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 Walsin Lihwa Corp are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Walsin Lihwa i.e., Walsin Lihwa and Taiwan Cement go up and down completely randomly.
Pair Corralation between Walsin Lihwa and Taiwan Cement
Assuming the 90 days trading horizon Walsin Lihwa Corp is expected to generate 1.38 times more return on investment than Taiwan Cement. However, Walsin Lihwa is 1.38 times more volatile than Taiwan Cement Corp. It trades about 0.23 of its potential returns per unit of risk. Taiwan Cement Corp is currently generating about 0.01 per unit of risk. If you would invest 2,335 in Walsin Lihwa Corp on November 5, 2024 and sell it today you would earn a total of 115.00 from holding Walsin Lihwa Corp or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walsin Lihwa Corp vs. Taiwan Cement Corp
Performance |
| Timeline |
| Walsin Lihwa Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Taiwan Cement Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Walsin Lihwa and Taiwan Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walsin Lihwa and Taiwan Cement
The main advantage of trading using opposite Walsin Lihwa and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walsin Lihwa position performs unexpectedly, Taiwan Cement 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 Cement will offset losses from the drop in Taiwan Cement's long position.The idea behind Walsin Lihwa Corp and Taiwan Cement Corp 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.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |