Correlation Between China Steel and Taiwan Hopax
Can any of the company-specific risk be diversified away by investing in both China Steel and Taiwan Hopax 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 Hopax 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 Hopax Chemsistry, you can compare the effects of market volatilities on China Steel and Taiwan Hopax 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 Hopax. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Steel and Taiwan Hopax.
Diversification Opportunities for China Steel and Taiwan Hopax
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Taiwan is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Steel Chemical and Taiwan Hopax Chemsistry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hopax Chemsistry 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 Hopax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hopax Chemsistry has no effect on the direction of China Steel i.e., China Steel and Taiwan Hopax go up and down completely randomly.
Pair Corralation between China Steel and Taiwan Hopax
Assuming the 90 days trading horizon China Steel Chemical is expected to under-perform the Taiwan Hopax. But the stock apears to be less risky and, when comparing its historical volatility, China Steel Chemical is 1.45 times less risky than Taiwan Hopax. The stock trades about -0.01 of its potential returns per unit of risk. The Taiwan Hopax Chemsistry is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 4,035 in Taiwan Hopax Chemsistry on August 30, 2024 and sell it today you would earn a total of 140.00 from holding Taiwan Hopax Chemsistry or generate 3.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
China Steel Chemical vs. Taiwan Hopax Chemsistry
Performance |
| Timeline |
| China Steel Chemical |
| Taiwan Hopax Chemsistry |
China Steel and Taiwan Hopax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Steel and Taiwan Hopax
The main advantage of trading using opposite China Steel and Taiwan Hopax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Steel position performs unexpectedly, Taiwan Hopax 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 Hopax will offset losses from the drop in Taiwan Hopax'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 Hopax vs. Nantex Industry Co | Taiwan Hopax vs. Chong Hong Construction | Taiwan Hopax vs. Cleanaway Co | Taiwan Hopax vs. Symtek Automation Asia |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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