Correlation Between China Container and Taiwan Navigation
Can any of the company-specific risk be diversified away by investing in both China Container and Taiwan Navigation 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 China Container and Taiwan Navigation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Container Terminal and Taiwan Navigation Co, you can compare the effects of market volatilities on China Container and Taiwan Navigation 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 China Container with a short position of Taiwan Navigation. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Container and Taiwan Navigation.
Diversification Opportunities for China Container and Taiwan Navigation
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Taiwan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Container Terminal and Taiwan Navigation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Navigation and China Container 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 China Container Terminal are associated (or correlated) with Taiwan Navigation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Navigation has no effect on the direction of China Container i.e., China Container and Taiwan Navigation go up and down completely randomly.
Pair Corralation between China Container and Taiwan Navigation
Assuming the 90 days trading horizon China Container Terminal is expected to generate 1.46 times more return on investment than Taiwan Navigation. However, China Container is 1.46 times more volatile than Taiwan Navigation Co. It trades about 0.04 of its potential returns per unit of risk. Taiwan Navigation Co is currently generating about 0.03 per unit of risk. If you would invest 2,220 in China Container Terminal on September 2, 2024 and sell it today you would earn a total of 1,060 from holding China Container Terminal or generate 47.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Container Terminal vs. Taiwan Navigation Co
Performance |
| Timeline |
| China Container Terminal |
| Taiwan Navigation |
China Container and Taiwan Navigation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Container and Taiwan Navigation
The main advantage of trading using opposite China Container and Taiwan Navigation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Container position performs unexpectedly, Taiwan Navigation 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 Navigation will offset losses from the drop in Taiwan Navigation's long position.| China Container vs. BES Engineering Co | China Container vs. Continental Holdings Corp | China Container vs. Kee Tai Properties | China Container vs. Hung Sheng Construction |
| Taiwan Navigation vs. BES Engineering Co | Taiwan Navigation vs. Continental Holdings Corp | Taiwan Navigation vs. Kee Tai Properties | Taiwan Navigation vs. Hung Sheng Construction |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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