Correlation Between China Steel and Taiwan Cooperative
Can any of the company-specific risk be diversified away by investing in both China Steel and Taiwan Cooperative 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 Steel and Taiwan Cooperative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Steel Chemical and Taiwan Cooperative Financial, you can compare the effects of market volatilities on China Steel and Taiwan Cooperative 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 Steel with a short position of Taiwan Cooperative. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Taiwan Cooperative.
Diversification Opportunities for China Steel and Taiwan Cooperative
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Taiwan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Taiwan Cooperative Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cooperative and China Steel 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 Steel Chemical are associated (or correlated) with Taiwan Cooperative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cooperative has no effect on the direction of China Steel i.e., China Steel and Taiwan Cooperative go up and down completely randomly.
Pair Corralation between China Steel and Taiwan Cooperative
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the Taiwan Cooperative. In addition to that, China Steel is 1.12 times more volatile than Taiwan Cooperative Financial. It trades about -0.01 of its total potential returns per unit of risk. Taiwan Cooperative Financial is currently generating about 0.01 per unit of volatility. If you would invest 2,470 in Taiwan Cooperative Financial on August 29, 2024 and sell it today you would earn a total of 40.00 from holding Taiwan Cooperative Financial or generate 1.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Steel Chemical vs. Taiwan Cooperative Financial
Performance |
| Timeline |
| China Steel Chemical |
| Taiwan Cooperative |
China Steel and Taiwan Cooperative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Taiwan Cooperative
The main advantage of trading using opposite China Steel and Taiwan Cooperative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Taiwan Cooperative 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 Cooperative will offset losses from the drop in Taiwan Cooperative's long position.| China Steel vs. Formosa Chemicals Fibre | China Steel vs. Formosa Plastics Corp | China Steel vs. Cheng Shin Rubber | China Steel vs. President Chain Store |
| Taiwan Cooperative vs. Taiwan Secom Co | Taiwan Cooperative vs. TTET Union Corp | Taiwan Cooperative vs. China Steel Chemical | Taiwan Cooperative vs. Taiwan Shin Kong |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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