Correlation Between Eternal Materials and Taiwan Fertilizer
Can any of the company-specific risk be diversified away by investing in both Eternal Materials and Taiwan Fertilizer 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 Eternal Materials and Taiwan Fertilizer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eternal Materials Co and Taiwan Fertilizer Co, you can compare the effects of market volatilities on Eternal Materials and Taiwan Fertilizer 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 Eternal Materials with a short position of Taiwan Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eternal Materials and Taiwan Fertilizer.
Diversification Opportunities for Eternal Materials and Taiwan Fertilizer
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eternal and Taiwan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Materials Co and Taiwan Fertilizer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Fertilizer and Eternal Materials 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 Eternal Materials Co are associated (or correlated) with Taiwan Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Fertilizer has no effect on the direction of Eternal Materials i.e., Eternal Materials and Taiwan Fertilizer go up and down completely randomly.
Pair Corralation between Eternal Materials and Taiwan Fertilizer
Assuming the 90 days trading horizon Eternal Materials is expected to generate 51.31 times less return on investment than Taiwan Fertilizer. But when comparing it to its historical volatility, Eternal Materials Co is 1.26 times less risky than Taiwan Fertilizer. It trades about 0.0 of its potential returns per unit of risk. Taiwan Fertilizer Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5,090 in Taiwan Fertilizer Co on November 5, 2024 and sell it today you would earn a total of 140.00 from holding Taiwan Fertilizer Co or generate 2.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eternal Materials Co vs. Taiwan Fertilizer Co
Performance |
| Timeline |
| Eternal Materials |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Taiwan Fertilizer |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Eternal Materials and Taiwan Fertilizer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eternal Materials and Taiwan Fertilizer
The main advantage of trading using opposite Eternal Materials and Taiwan Fertilizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eternal Materials position performs unexpectedly, Taiwan Fertilizer 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 Fertilizer will offset losses from the drop in Taiwan Fertilizer's long position.The idea behind Eternal Materials Co and Taiwan Fertilizer Co 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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