Correlation Between Fortune Information and Taiwan Hon
Can any of the company-specific risk be diversified away by investing in both Fortune Information and Taiwan Hon 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 Fortune Information and Taiwan Hon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortune Information Systems and Taiwan Hon Chuan, you can compare the effects of market volatilities on Fortune Information and Taiwan Hon 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 Fortune Information with a short position of Taiwan Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Information and Taiwan Hon.
Diversification Opportunities for Fortune Information and Taiwan Hon
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fortune and Taiwan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Information Systems and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan and Fortune Information 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 Fortune Information Systems are associated (or correlated) with Taiwan Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of Fortune Information i.e., Fortune Information and Taiwan Hon go up and down completely randomly.
Pair Corralation between Fortune Information and Taiwan Hon
Assuming the 90 days trading horizon Fortune Information Systems is expected to under-perform the Taiwan Hon. In addition to that, Fortune Information is 1.81 times more volatile than Taiwan Hon Chuan. It trades about -0.01 of its total potential returns per unit of risk. Taiwan Hon Chuan is currently generating about 0.07 per unit of volatility. If you would invest 10,250 in Taiwan Hon Chuan on September 4, 2024 and sell it today you would earn a total of 4,600 from holding Taiwan Hon Chuan or generate 44.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortune Information Systems vs. Taiwan Hon Chuan
Performance |
| Timeline |
| Fortune Information |
| Taiwan Hon Chuan |
Fortune Information and Taiwan Hon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Information and Taiwan Hon
The main advantage of trading using opposite Fortune Information and Taiwan Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Information position performs unexpectedly, Taiwan Hon 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 Hon will offset losses from the drop in Taiwan Hon's long position.| Fortune Information vs. Taiwan Semiconductor Manufacturing | Fortune Information vs. Yang Ming Marine | Fortune Information vs. ASE Industrial Holding | Fortune Information vs. AU Optronics |
| Taiwan Hon vs. Loop Telecommunication International | Taiwan Hon vs. Asustek Computer | Taiwan Hon vs. Oceanic Beverages Co | Taiwan Hon vs. Chunghwa Telecom Co |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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