Correlation Between Taiwan Navigation and China Container
Can any of the company-specific risk be diversified away by investing in both Taiwan Navigation and China Container 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 Container 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 Container Terminal, you can compare the effects of market volatilities on Taiwan Navigation and China Container 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 Container. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Navigation and China Container.
Diversification Opportunities for Taiwan Navigation and China Container
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and China is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and China Container Terminal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Container Terminal 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 Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Container Terminal has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and China Container go up and down completely randomly.
Pair Corralation between Taiwan Navigation and China Container
Assuming the 90 days trading horizon Taiwan Navigation is expected to generate 2.29 times less return on investment than China Container. But when comparing it to its historical volatility, Taiwan Navigation Co is 1.46 times less risky than China Container. It trades about 0.03 of its potential returns per unit of risk. China Container Terminal is currently generating about 0.04 of returns per unit of risk over similar time horizon. 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 |
Taiwan Navigation Co vs. China Container Terminal
Performance |
| Timeline |
| Taiwan Navigation |
| China Container Terminal |
Taiwan Navigation and China Container Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Navigation and China Container
The main advantage of trading using opposite Taiwan Navigation and China Container positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Navigation position performs unexpectedly, China Container 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 Container will offset losses from the drop in China Container's long position.| Taiwan Navigation vs. BES Engineering Co | Taiwan Navigation vs. Continental Holdings Corp | Taiwan Navigation vs. Kee Tai Properties | Taiwan Navigation vs. Hung Sheng Construction |
| China Container vs. BES Engineering Co | China Container vs. Continental Holdings Corp | China Container vs. Kee Tai Properties | China Container 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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