Correlation Between Taichung Commercial and Hua Nan
Can any of the company-specific risk be diversified away by investing in both Taichung Commercial and Hua Nan 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 Hua Nan 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 Hua Nan Financial, you can compare the effects of market volatilities on Taichung Commercial and Hua Nan 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 Hua Nan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taichung Commercial and Hua Nan.
Diversification Opportunities for Taichung Commercial and Hua Nan
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Taichung and Hua is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Taichung Commercial Bank and Hua Nan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Nan Financial 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 Hua Nan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Nan Financial has no effect on the direction of Taichung Commercial i.e., Taichung Commercial and Hua Nan go up and down completely randomly.
Pair Corralation between Taichung Commercial and Hua Nan
Assuming the 90 days trading horizon Taichung Commercial is expected to generate 6.73 times less return on investment than Hua Nan. But when comparing it to its historical volatility, Taichung Commercial Bank is 2.07 times less risky than Hua Nan. It trades about 0.1 of its potential returns per unit of risk. Hua Nan Financial is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,605 in Hua Nan Financial on October 26, 2024 and sell it today you would earn a total of 195.00 from holding Hua Nan Financial or generate 7.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taichung Commercial Bank vs. Hua Nan Financial
Performance |
| Timeline |
| Taichung Commercial Bank |
| Hua Nan Financial |
Taichung Commercial and Hua Nan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taichung Commercial and Hua Nan
The main advantage of trading using opposite Taichung Commercial and Hua Nan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taichung Commercial position performs unexpectedly, Hua Nan 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 Hua Nan will offset losses from the drop in Hua Nan's long position.| Taichung Commercial vs. Taiwan Business Bank | Taichung Commercial vs. Taishin Financial Holding | Taichung Commercial vs. Hua Nan Financial | Taichung Commercial vs. ESUN Financial Holding |
| Hua Nan vs. First Financial Holding | Hua Nan vs. Mega Financial Holding | Hua Nan vs. CTBC Financial Holding | Hua Nan vs. ESUN 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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