Correlation Between Hotai and Tainan Spinning
Can any of the company-specific risk be diversified away by investing in both Hotai and Tainan Spinning 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 Hotai and Tainan Spinning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hotai Motor Co and Tainan Spinning Co, you can compare the effects of market volatilities on Hotai and Tainan Spinning 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 Hotai with a short position of Tainan Spinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotai and Tainan Spinning.
Diversification Opportunities for Hotai and Tainan Spinning
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hotai and Tainan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hotai Motor Co and Tainan Spinning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Spinning and Hotai 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 Hotai Motor Co are associated (or correlated) with Tainan Spinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Spinning has no effect on the direction of Hotai i.e., Hotai and Tainan Spinning go up and down completely randomly.
Pair Corralation between Hotai and Tainan Spinning
Assuming the 90 days trading horizon Hotai Motor Co is expected to under-perform the Tainan Spinning. In addition to that, Hotai is 1.57 times more volatile than Tainan Spinning Co. It trades about -0.17 of its total potential returns per unit of risk. Tainan Spinning Co is currently generating about 0.0 per unit of volatility. If you would invest 1,520 in Tainan Spinning Co on September 1, 2024 and sell it today you would earn a total of 0.00 from holding Tainan Spinning Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hotai Motor Co vs. Tainan Spinning Co
Performance |
| Timeline |
| Hotai Motor |
| Tainan Spinning |
Hotai and Tainan Spinning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hotai and Tainan Spinning
The main advantage of trading using opposite Hotai and Tainan Spinning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotai position performs unexpectedly, Tainan Spinning 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 Tainan Spinning will offset losses from the drop in Tainan Spinning's long position.| Hotai vs. President Chain Store | Hotai vs. Formosa Petrochemical Corp | Hotai vs. Cheng Shin Rubber | Hotai vs. Formosa Chemicals Fibre |
| Tainan Spinning vs. Lealea Enterprise Co | Tainan Spinning vs. China Petrochemical Development | Tainan Spinning vs. Li Peng Enterprise | Tainan Spinning vs. Oriental Union Chemical |
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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