Correlation Between Chia Yi and Taiwan Steel
Can any of the company-specific risk be diversified away by investing in both Chia Yi 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 Chia Yi and Taiwan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chia Yi Steel and Taiwan Steel Union, you can compare the effects of market volatilities on Chia Yi 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 Chia Yi with a short position of Taiwan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Yi and Taiwan Steel.
Diversification Opportunities for Chia Yi and Taiwan Steel
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Chia and Taiwan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Chia Yi 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 Chia Yi 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 Chia Yi 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 Chia Yi i.e., Chia Yi and Taiwan Steel go up and down completely randomly.
Pair Corralation between Chia Yi and Taiwan Steel
Assuming the 90 days trading horizon Chia Yi Steel is expected to generate 4.51 times more return on investment than Taiwan Steel. However, Chia Yi is 4.51 times more volatile than Taiwan Steel Union. It trades about 0.03 of its potential returns per unit of risk. Taiwan Steel Union is currently generating about -0.43 per unit of risk. If you would invest 1,090 in Chia Yi Steel on August 27, 2024 and sell it today you would earn a total of 5.00 from holding Chia Yi Steel or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Chia Yi Steel vs. Taiwan Steel Union
Performance |
| Timeline |
| Chia Yi Steel |
| Taiwan Steel Union |
Chia Yi and Taiwan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chia Yi and Taiwan Steel
The main advantage of trading using opposite Chia Yi and Taiwan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia Yi 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.| Chia Yi vs. International CSRC Investment | Chia Yi vs. Simplo Technology Co | Chia Yi vs. Gigastorage Corp | Chia Yi vs. Yuan High Tech Development |
| Taiwan Steel vs. Cleanaway Co | Taiwan Steel vs. Sunny Friend Environmental | Taiwan Steel vs. Topco Scientific Co | Taiwan Steel vs. Kung Long Batteries |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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