Correlation Between Taiwan Glass and Nankang Rubber
Can any of the company-specific risk be diversified away by investing in both Taiwan Glass and Nankang Rubber 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 Glass and Nankang Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Glass Ind and Nankang Rubber Tire, you can compare the effects of market volatilities on Taiwan Glass and Nankang Rubber 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 Glass with a short position of Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Glass and Nankang Rubber.
Diversification Opportunities for Taiwan Glass and Nankang Rubber
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and Nankang is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Glass Ind and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire and Taiwan Glass 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 Glass Ind are associated (or correlated) with Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of Taiwan Glass i.e., Taiwan Glass and Nankang Rubber go up and down completely randomly.
Pair Corralation between Taiwan Glass and Nankang Rubber
Assuming the 90 days trading horizon Taiwan Glass Ind is expected to generate 1.34 times more return on investment than Nankang Rubber. However, Taiwan Glass is 1.34 times more volatile than Nankang Rubber Tire. It trades about 0.02 of its potential returns per unit of risk. Nankang Rubber Tire is currently generating about -0.03 per unit of risk. If you would invest 1,985 in Taiwan Glass Ind on August 30, 2024 and sell it today you would earn a total of 10.00 from holding Taiwan Glass Ind or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Glass Ind vs. Nankang Rubber Tire
Performance |
| Timeline |
| Taiwan Glass Ind |
| Nankang Rubber Tire |
Taiwan Glass and Nankang Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Glass and Nankang Rubber
The main advantage of trading using opposite Taiwan Glass and Nankang Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Glass position performs unexpectedly, Nankang Rubber 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 Nankang Rubber will offset losses from the drop in Nankang Rubber's long position.| Taiwan Glass vs. Yulon Motor Co | Taiwan Glass vs. Far Eastern Department | Taiwan Glass vs. China Steel Corp | Taiwan Glass vs. Chang Hwa Commercial |
| Nankang Rubber vs. Yulon Motor Co | Nankang Rubber vs. Federal Corp | Nankang Rubber vs. Kenda Rubber Industrial | Nankang Rubber vs. Taiwan Glass Ind |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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