Correlation Between Taiwan Fertilizer and Cheng Shin
Can any of the company-specific risk be diversified away by investing in both Taiwan Fertilizer and Cheng Shin 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 Taiwan Fertilizer and Cheng Shin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Fertilizer Co and Cheng Shin Rubber, you can compare the effects of market volatilities on Taiwan Fertilizer and Cheng Shin 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 Taiwan Fertilizer with a short position of Cheng Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Fertilizer and Cheng Shin.
Diversification Opportunities for Taiwan Fertilizer and Cheng Shin
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Taiwan and Cheng is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Fertilizer Co and Cheng Shin Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Shin Rubber and Taiwan Fertilizer 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 Taiwan Fertilizer Co are associated (or correlated) with Cheng Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Shin Rubber has no effect on the direction of Taiwan Fertilizer i.e., Taiwan Fertilizer and Cheng Shin go up and down completely randomly.
Pair Corralation between Taiwan Fertilizer and Cheng Shin
Assuming the 90 days trading horizon Taiwan Fertilizer Co is expected to under-perform the Cheng Shin. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Fertilizer Co is 2.73 times less risky than Cheng Shin. The stock trades about -0.03 of its potential returns per unit of risk. The Cheng Shin Rubber is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,605 in Cheng Shin Rubber on August 30, 2024 and sell it today you would earn a total of 495.00 from holding Cheng Shin Rubber or generate 10.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Fertilizer Co vs. Cheng Shin Rubber
Performance |
| Timeline |
| Taiwan Fertilizer |
| Cheng Shin Rubber |
Taiwan Fertilizer and Cheng Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Fertilizer and Cheng Shin
The main advantage of trading using opposite Taiwan Fertilizer and Cheng Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Fertilizer position performs unexpectedly, Cheng Shin 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 Cheng Shin will offset losses from the drop in Cheng Shin's long position.| Taiwan Fertilizer vs. Taiwan Cement Corp | Taiwan Fertilizer vs. Far Eastern New | Taiwan Fertilizer vs. Asia Cement Corp | Taiwan Fertilizer vs. Formosa Plastics Corp |
| Cheng Shin vs. Uni President Enterprises Corp | Cheng Shin vs. Formosa Chemicals Fibre | Cheng Shin vs. Asia Cement Corp | Cheng Shin vs. Pou Chen Corp |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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