Correlation Between Taiwan High and Aerospace Industrial
Can any of the company-specific risk be diversified away by investing in both Taiwan High and Aerospace Industrial 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 Aerospace Industrial 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 Aerospace Industrial Development, you can compare the effects of market volatilities on Taiwan High and Aerospace Industrial 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 Aerospace Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan High and Aerospace Industrial.
Diversification Opportunities for Taiwan High and Aerospace Industrial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Taiwan and Aerospace is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan High Speed and Aerospace Industrial Developme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Industrial 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 Aerospace Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Industrial has no effect on the direction of Taiwan High i.e., Taiwan High and Aerospace Industrial go up and down completely randomly.
Pair Corralation between Taiwan High and Aerospace Industrial
Assuming the 90 days trading horizon Taiwan High Speed is expected to generate 0.47 times more return on investment than Aerospace Industrial. However, Taiwan High Speed is 2.14 times less risky than Aerospace Industrial. It trades about -0.05 of its potential returns per unit of risk. Aerospace Industrial Development is currently generating about -0.09 per unit of risk. If you would invest 2,980 in Taiwan High Speed on September 2, 2024 and sell it today you would lose (155.00) from holding Taiwan High Speed or give up 5.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan High Speed vs. Aerospace Industrial Developme
Performance |
| Timeline |
| Taiwan High Speed |
| Aerospace Industrial |
Taiwan High and Aerospace Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan High and Aerospace Industrial
The main advantage of trading using opposite Taiwan High and Aerospace Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan High position performs unexpectedly, Aerospace Industrial 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 Aerospace Industrial will offset losses from the drop in Aerospace Industrial'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 |
| Aerospace Industrial vs. CSBC Corp Taiwan | Aerospace Industrial vs. Eva Airways Corp | Aerospace Industrial vs. Taiwan High Speed | Aerospace Industrial vs. China Airlines |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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