Correlation Between Chang Hwa and Taiwan Business
Can any of the company-specific risk be diversified away by investing in both Chang Hwa and Taiwan Business 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 Chang Hwa and Taiwan Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chang Hwa Commercial and Taiwan Business Bank, you can compare the effects of market volatilities on Chang Hwa and Taiwan Business 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 Chang Hwa with a short position of Taiwan Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chang Hwa and Taiwan Business.
Diversification Opportunities for Chang Hwa and Taiwan Business
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chang and Taiwan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chang Hwa Commercial and Taiwan Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Business Bank and Chang Hwa 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 Chang Hwa Commercial are associated (or correlated) with Taiwan Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Business Bank has no effect on the direction of Chang Hwa i.e., Chang Hwa and Taiwan Business go up and down completely randomly.
Pair Corralation between Chang Hwa and Taiwan Business
Assuming the 90 days trading horizon Chang Hwa Commercial is expected to generate 0.5 times more return on investment than Taiwan Business. However, Chang Hwa Commercial is 1.98 times less risky than Taiwan Business. It trades about -0.02 of its potential returns per unit of risk. Taiwan Business Bank is currently generating about -0.05 per unit of risk. If you would invest 1,820 in Chang Hwa Commercial on August 29, 2024 and sell it today you would lose (45.00) from holding Chang Hwa Commercial or give up 2.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chang Hwa Commercial vs. Taiwan Business Bank
Performance |
| Timeline |
| Chang Hwa Commercial |
| Taiwan Business Bank |
Chang Hwa and Taiwan Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chang Hwa and Taiwan Business
The main advantage of trading using opposite Chang Hwa and Taiwan Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chang Hwa position performs unexpectedly, Taiwan Business 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 Taiwan Business will offset losses from the drop in Taiwan Business' long position.| Chang Hwa vs. Taiwan Secom Co | Chang Hwa vs. TTET Union Corp | Chang Hwa vs. China Steel Chemical | Chang Hwa vs. Taiwan Shin Kong |
| Taiwan Business vs. First Financial Holding | Taiwan Business vs. Chang Hwa Commercial | Taiwan Business vs. Sinopac Financial Holdings | Taiwan Business vs. Taishin Financial Holding |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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