Correlation Between Sheng Yu and Taiwan Steel
Can any of the company-specific risk be diversified away by investing in both Sheng Yu and Taiwan Steel 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 Sheng Yu and Taiwan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sheng Yu Steel and Taiwan Steel Union, you can compare the effects of market volatilities on Sheng Yu and Taiwan Steel 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 Sheng Yu with a short position of Taiwan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sheng Yu and Taiwan Steel.
Diversification Opportunities for Sheng Yu and Taiwan Steel
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sheng and Taiwan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sheng Yu Steel and Taiwan Steel Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Steel Union and Sheng Yu 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 Sheng Yu Steel are associated (or correlated) with Taiwan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Steel Union has no effect on the direction of Sheng Yu i.e., Sheng Yu and Taiwan Steel go up and down completely randomly.
Pair Corralation between Sheng Yu and Taiwan Steel
Assuming the 90 days trading horizon Sheng Yu Steel is expected to generate 0.66 times more return on investment than Taiwan Steel. However, Sheng Yu Steel is 1.51 times less risky than Taiwan Steel. It trades about -0.1 of its potential returns per unit of risk. Taiwan Steel Union is currently generating about -0.35 per unit of risk. If you would invest 2,585 in Sheng Yu Steel on August 29, 2024 and sell it today you would lose (55.00) from holding Sheng Yu Steel or give up 2.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sheng Yu Steel vs. Taiwan Steel Union
Performance |
| Timeline |
| Sheng Yu Steel |
| Taiwan Steel Union |
Sheng Yu and Taiwan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sheng Yu and Taiwan Steel
The main advantage of trading using opposite Sheng Yu and Taiwan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sheng Yu position performs unexpectedly, Taiwan Steel 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 Steel will offset losses from the drop in Taiwan Steel's long position.The idea behind Sheng Yu Steel and Taiwan Steel Union 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.| Taiwan Steel vs. Cleanaway Co | Taiwan Steel vs. Taiwan Secom Co | Taiwan Steel vs. Sunny Friend Environmental | Taiwan Steel vs. TTET Union 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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