Correlation Between Taichung Commercial and Chang Hwa
Can any of the company-specific risk be diversified away by investing in both Taichung Commercial and Chang Hwa 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 Taichung Commercial and Chang Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taichung Commercial Bank and Chang Hwa Commercial, you can compare the effects of market volatilities on Taichung Commercial and Chang Hwa 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 Taichung Commercial with a short position of Chang Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taichung Commercial and Chang Hwa.
Diversification Opportunities for Taichung Commercial and Chang Hwa
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Taichung and Chang is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Taichung Commercial Bank and Chang Hwa Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chang Hwa Commercial and Taichung Commercial 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 Taichung Commercial Bank are associated (or correlated) with Chang Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chang Hwa Commercial has no effect on the direction of Taichung Commercial i.e., Taichung Commercial and Chang Hwa go up and down completely randomly.
Pair Corralation between Taichung Commercial and Chang Hwa
Assuming the 90 days trading horizon Taichung Commercial Bank is expected to generate 1.23 times more return on investment than Chang Hwa. However, Taichung Commercial is 1.23 times more volatile than Chang Hwa Commercial. It trades about 0.05 of its potential returns per unit of risk. Chang Hwa Commercial is currently generating about 0.03 per unit of risk. If you would invest 1,795 in Taichung Commercial Bank on August 24, 2024 and sell it today you would earn a total of 10.00 from holding Taichung Commercial Bank or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taichung Commercial Bank vs. Chang Hwa Commercial
Performance |
| Timeline |
| Taichung Commercial Bank |
| Chang Hwa Commercial |
Taichung Commercial and Chang Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taichung Commercial and Chang Hwa
The main advantage of trading using opposite Taichung Commercial and Chang Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taichung Commercial position performs unexpectedly, Chang Hwa 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 Chang Hwa will offset losses from the drop in Chang Hwa's long position.| Taichung Commercial vs. Fubon Financial Holding | Taichung Commercial vs. CTBC Financial Holding | Taichung Commercial vs. Mega Financial Holding | Taichung Commercial vs. Cathay Financial Holding |
| Chang Hwa vs. Hua Nan Financial | Chang Hwa vs. First Financial Holding | Chang Hwa vs. Sinopac Financial Holdings | Chang Hwa 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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