Correlation Between Taiwan Navigation and U Ming
Can any of the company-specific risk be diversified away by investing in both Taiwan Navigation and U Ming 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 Navigation and U Ming into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Navigation Co and U Ming Marine Transport, you can compare the effects of market volatilities on Taiwan Navigation and U Ming 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 Navigation with a short position of U Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Navigation and U Ming.
Diversification Opportunities for Taiwan Navigation and U Ming
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and 2606 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and U Ming Marine Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Ming Marine and Taiwan Navigation 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 Navigation Co are associated (or correlated) with U Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Ming Marine has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and U Ming go up and down completely randomly.
Pair Corralation between Taiwan Navigation and U Ming
Assuming the 90 days trading horizon Taiwan Navigation Co is expected to under-perform the U Ming. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Navigation Co is 1.35 times less risky than U Ming. The stock trades about -0.02 of its potential returns per unit of risk. The U Ming Marine Transport is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,925 in U Ming Marine Transport on November 4, 2024 and sell it today you would earn a total of 825.00 from holding U Ming Marine Transport or generate 16.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Navigation Co vs. U Ming Marine Transport
Performance |
| Timeline |
| Taiwan Navigation |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| U Ming Marine |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Taiwan Navigation and U Ming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Navigation and U Ming
The main advantage of trading using opposite Taiwan Navigation and U Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Navigation position performs unexpectedly, U Ming 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 U Ming will offset losses from the drop in U Ming's long position.The idea behind Taiwan Navigation Co and U Ming Marine Transport pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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