Correlation Between Taiwan Mask and Elite Material
Can any of the company-specific risk be diversified away by investing in both Taiwan Mask and Elite Material 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 Taiwan Mask and Elite Material into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Mask Corp and Elite Material Co, you can compare the effects of market volatilities on Taiwan Mask and Elite Material 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 Taiwan Mask with a short position of Elite Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Mask and Elite Material.
Diversification Opportunities for Taiwan Mask and Elite Material
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Taiwan and Elite is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Mask Corp and Elite Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Material and Taiwan Mask 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 Taiwan Mask Corp are associated (or correlated) with Elite Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Material has no effect on the direction of Taiwan Mask i.e., Taiwan Mask and Elite Material go up and down completely randomly.
Pair Corralation between Taiwan Mask and Elite Material
Assuming the 90 days trading horizon Taiwan Mask Corp is expected to under-perform the Elite Material. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Mask Corp is 1.33 times less risky than Elite Material. The stock trades about -0.13 of its potential returns per unit of risk. The Elite Material Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 44,200 in Elite Material Co on September 3, 2024 and sell it today you would earn a total of 2,650 from holding Elite Material Co or generate 6.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Mask Corp vs. Elite Material Co
Performance |
| Timeline |
| Taiwan Mask Corp |
| Elite Material |
Taiwan Mask and Elite Material Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Mask and Elite Material
The main advantage of trading using opposite Taiwan Mask and Elite Material positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Mask position performs unexpectedly, Elite Material 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 Elite Material will offset losses from the drop in Elite Material's long position.| Taiwan Mask vs. Taiwan Semiconductor Manufacturing | Taiwan Mask vs. Yang Ming Marine | Taiwan Mask vs. ASE Industrial Holding | Taiwan Mask vs. AU Optronics |
| Elite Material vs. Taiwan Semiconductor Manufacturing | Elite Material vs. Yang Ming Marine | Elite Material vs. ASE Industrial Holding | Elite Material vs. AU Optronics |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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