Correlation Between Taichung Commercial and Sinopac Financial
Can any of the company-specific risk be diversified away by investing in both Taichung Commercial and Sinopac Financial 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 Sinopac Financial 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 Sinopac Financial Holdings, you can compare the effects of market volatilities on Taichung Commercial and Sinopac Financial 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 Sinopac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taichung Commercial and Sinopac Financial.
Diversification Opportunities for Taichung Commercial and Sinopac Financial
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Taichung and Sinopac is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Taichung Commercial Bank and Sinopac Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopac 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 Sinopac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopac Financial has no effect on the direction of Taichung Commercial i.e., Taichung Commercial and Sinopac Financial go up and down completely randomly.
Pair Corralation between Taichung Commercial and Sinopac Financial
Assuming the 90 days trading horizon Taichung Commercial Bank is expected to generate 0.94 times more return on investment than Sinopac Financial. However, Taichung Commercial Bank is 1.07 times less risky than Sinopac Financial. It trades about 0.25 of its potential returns per unit of risk. Sinopac Financial Holdings is currently generating about -0.05 per unit of risk. If you would invest 1,855 in Taichung Commercial Bank on November 3, 2024 and sell it today you would earn a total of 35.00 from holding Taichung Commercial Bank or generate 1.89% 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. Sinopac Financial Holdings
Performance |
| Timeline |
| Taichung Commercial Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Sinopac Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Taichung Commercial and Sinopac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taichung Commercial and Sinopac Financial
The main advantage of trading using opposite Taichung Commercial and Sinopac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taichung Commercial position performs unexpectedly, Sinopac Financial 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 Sinopac Financial will offset losses from the drop in Sinopac Financial's long position.The idea behind Taichung Commercial Bank and Sinopac Financial Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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