Correlation Between Cheng Shin and Taiwan Cement
Can any of the company-specific risk be diversified away by investing in both Cheng Shin and Taiwan Cement 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 Cheng Shin and Taiwan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheng Shin Rubber and Taiwan Cement Corp, you can compare the effects of market volatilities on Cheng Shin and Taiwan Cement 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 Cheng Shin with a short position of Taiwan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Taiwan Cement.
Diversification Opportunities for Cheng Shin and Taiwan Cement
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cheng and Taiwan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and Cheng Shin 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 Cheng Shin Rubber are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Cheng Shin i.e., Cheng Shin and Taiwan Cement go up and down completely randomly.
Pair Corralation between Cheng Shin and Taiwan Cement
Assuming the 90 days trading horizon Cheng Shin Rubber is expected to generate 1.66 times more return on investment than Taiwan Cement. However, Cheng Shin is 1.66 times more volatile than Taiwan Cement Corp. It trades about 0.05 of its potential returns per unit of risk. Taiwan Cement Corp is currently generating about -0.02 per unit of risk. If you would invest 3,455 in Cheng Shin Rubber on October 25, 2024 and sell it today you would earn a total of 1,510 from holding Cheng Shin Rubber or generate 43.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheng Shin Rubber vs. Taiwan Cement Corp
Performance |
| Timeline |
| Cheng Shin Rubber |
| Taiwan Cement Corp |
Cheng Shin and Taiwan Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheng Shin and Taiwan Cement
The main advantage of trading using opposite Cheng Shin and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Shin position performs unexpectedly, Taiwan Cement 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 Cement will offset losses from the drop in Taiwan Cement's long position.| Cheng Shin vs. Uni President Enterprises Corp | Cheng Shin vs. Formosa Chemicals Fibre | Cheng Shin vs. Asia Cement Corp | Cheng Shin vs. Pou Chen Corp |
| Taiwan Cement vs. Asia Cement Corp | Taiwan Cement vs. Formosa Plastics Corp | Taiwan Cement vs. Nan Ya Plastics | Taiwan Cement vs. China Steel 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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