Correlation Between Tang Eng and Taiwan Steel
Can any of the company-specific risk be diversified away by investing in both Tang Eng 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 Tang Eng and Taiwan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tang Eng Iron and Taiwan Steel Union, you can compare the effects of market volatilities on Tang Eng 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 Tang Eng with a short position of Taiwan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tang Eng and Taiwan Steel.
Diversification Opportunities for Tang Eng and Taiwan Steel
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tang and Taiwan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tang Eng Iron 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 Tang Eng 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 Tang Eng Iron 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 Tang Eng i.e., Tang Eng and Taiwan Steel go up and down completely randomly.
Pair Corralation between Tang Eng and Taiwan Steel
Assuming the 90 days trading horizon Tang Eng is expected to generate 3.39 times less return on investment than Taiwan Steel. But when comparing it to its historical volatility, Tang Eng Iron is 1.43 times less risky than Taiwan Steel. It trades about 0.02 of its potential returns per unit of risk. Taiwan Steel Union is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,680 in Taiwan Steel Union on September 2, 2024 and sell it today you would earn a total of 2,420 from holding Taiwan Steel Union or generate 27.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tang Eng Iron vs. Taiwan Steel Union
Performance |
| Timeline |
| Tang Eng Iron |
| Taiwan Steel Union |
Tang Eng and Taiwan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tang Eng and Taiwan Steel
The main advantage of trading using opposite Tang Eng and Taiwan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tang Eng 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.| Tang Eng vs. Basso Industry Corp | Tang Eng vs. Chung Hsin Electric Machinery | Tang Eng vs. TYC Brother Industrial | Tang Eng vs. TECO Electric Machinery |
| Taiwan Steel vs. Cleanaway Co | Taiwan Steel vs. Taiwan Secom Co | Taiwan Steel vs. TTET Union Corp | Taiwan Steel vs. Tehmag Foods |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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