Correlation Between Elite Material and Taiwan Speciality
Can any of the company-specific risk be diversified away by investing in both Elite Material and Taiwan Speciality 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 Elite Material and Taiwan Speciality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elite Material Co and Taiwan Speciality Chemicals, you can compare the effects of market volatilities on Elite Material and Taiwan Speciality 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 Elite Material with a short position of Taiwan Speciality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Taiwan Speciality.
Diversification Opportunities for Elite Material and Taiwan Speciality
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Elite and Taiwan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Taiwan Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Speciality and Elite Material 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 Elite Material Co are associated (or correlated) with Taiwan Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Speciality has no effect on the direction of Elite Material i.e., Elite Material and Taiwan Speciality go up and down completely randomly.
Pair Corralation between Elite Material and Taiwan Speciality
Assuming the 90 days trading horizon Elite Material Co is expected to under-perform the Taiwan Speciality. In addition to that, Elite Material is 1.01 times more volatile than Taiwan Speciality Chemicals. It trades about -0.02 of its total potential returns per unit of risk. Taiwan Speciality Chemicals is currently generating about 0.56 per unit of volatility. If you would invest 16,000 in Taiwan Speciality Chemicals on October 14, 2024 and sell it today you would earn a total of 4,500 from holding Taiwan Speciality Chemicals or generate 28.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elite Material Co vs. Taiwan Speciality Chemicals
Performance |
| Timeline |
| Elite Material |
| Taiwan Speciality |
Elite Material and Taiwan Speciality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elite Material and Taiwan Speciality
The main advantage of trading using opposite Elite Material and Taiwan Speciality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Material position performs unexpectedly, Taiwan Speciality 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 Speciality will offset losses from the drop in Taiwan Speciality's long position.| Elite Material vs. Compeq Manufacturing Co | Elite Material vs. ITEQ Corp | Elite Material vs. Unimicron Technology Corp | Elite Material vs. Chicony Electronics Co |
| Taiwan Speciality vs. Elite Material Co | Taiwan Speciality vs. Gloria Material Technology | Taiwan Speciality vs. Hwa Fong Rubber | Taiwan Speciality vs. Daxin Materials 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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