Correlation Between Taiwan Navigation and China Airlines
Can any of the company-specific risk be diversified away by investing in both Taiwan Navigation and China Airlines 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 China Airlines 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 China Airlines, you can compare the effects of market volatilities on Taiwan Navigation and China Airlines 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 China Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Navigation and China Airlines.
Diversification Opportunities for Taiwan Navigation and China Airlines
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and China is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and China Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Airlines 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 China Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Airlines has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and China Airlines go up and down completely randomly.
Pair Corralation between Taiwan Navigation and China Airlines
Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 0.56 times more return on investment than China Airlines. However, Taiwan Navigation Co is 1.78 times less risky than China Airlines. It trades about -0.05 of its potential returns per unit of risk. China Airlines is currently generating about -0.06 per unit of risk. If you would invest 2,945 in Taiwan Navigation Co on October 25, 2024 and sell it today you would lose (35.00) from holding Taiwan Navigation Co or give up 1.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Navigation Co vs. China Airlines
Performance |
| Timeline |
| Taiwan Navigation |
| China Airlines |
Taiwan Navigation and China Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Navigation and China Airlines
The main advantage of trading using opposite Taiwan Navigation and China Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Navigation position performs unexpectedly, China Airlines 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 China Airlines will offset losses from the drop in China Airlines' long position.| Taiwan Navigation vs. U Ming Marine Transport | Taiwan Navigation vs. Sincere Navigation Corp | Taiwan Navigation vs. Wan Hai Lines | Taiwan Navigation vs. Chinese Maritime Transport |
| China Airlines vs. Eva Airways Corp | China Airlines vs. Evergreen Marine Corp | China Airlines vs. Yang Ming Marine | China Airlines vs. China Steel 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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