Correlation Between Taiwan High and Hotai
Can any of the company-specific risk be diversified away by investing in both Taiwan High and Hotai 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 High and Hotai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan High Speed and Hotai Motor Co, you can compare the effects of market volatilities on Taiwan High and Hotai 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 High with a short position of Hotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan High and Hotai.
Diversification Opportunities for Taiwan High and Hotai
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Hotai is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan High Speed and Hotai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotai Motor and Taiwan High 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 High Speed are associated (or correlated) with Hotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotai Motor has no effect on the direction of Taiwan High i.e., Taiwan High and Hotai go up and down completely randomly.
Pair Corralation between Taiwan High and Hotai
Assuming the 90 days trading horizon Taiwan High Speed is expected to generate 0.49 times more return on investment than Hotai. However, Taiwan High Speed is 2.03 times less risky than Hotai. It trades about -0.03 of its potential returns per unit of risk. Hotai Motor Co is currently generating about -0.03 per unit of risk. If you would invest 3,015 in Taiwan High Speed on September 2, 2024 and sell it today you would lose (190.00) from holding Taiwan High Speed or give up 6.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan High Speed vs. Hotai Motor Co
Performance |
| Timeline |
| Taiwan High Speed |
| Hotai Motor |
Taiwan High and Hotai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan High and Hotai
The main advantage of trading using opposite Taiwan High and Hotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan High position performs unexpectedly, Hotai 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 Hotai will offset losses from the drop in Hotai's long position.| Taiwan High vs. Chunghwa Telecom Co | Taiwan High vs. ESUN Financial Holding | Taiwan High vs. Mega Financial Holding | Taiwan High vs. Taiwan Cement Corp |
| Hotai vs. President Chain Store | Hotai vs. Formosa Petrochemical Corp | Hotai vs. Cheng Shin Rubber | Hotai vs. Formosa Chemicals Fibre |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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