Correlation Between Taiwan Fire and Mega Financial
Can any of the company-specific risk be diversified away by investing in both Taiwan Fire and Mega 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 Taiwan Fire and Mega Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Fire Marine and Mega Financial Holding, you can compare the effects of market volatilities on Taiwan Fire and Mega 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 Taiwan Fire with a short position of Mega Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Fire and Mega Financial.
Diversification Opportunities for Taiwan Fire and Mega Financial
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Taiwan and Mega is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Fire Marine and Mega Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Financial Holding and Taiwan Fire 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 Fire Marine are associated (or correlated) with Mega Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Financial Holding has no effect on the direction of Taiwan Fire i.e., Taiwan Fire and Mega Financial go up and down completely randomly.
Pair Corralation between Taiwan Fire and Mega Financial
Assuming the 90 days trading horizon Taiwan Fire Marine is expected to under-perform the Mega Financial. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Fire Marine is 1.16 times less risky than Mega Financial. The stock trades about -0.27 of its potential returns per unit of risk. The Mega Financial Holding is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 3,940 in Mega Financial Holding on October 12, 2024 and sell it today you would lose (80.00) from holding Mega Financial Holding or give up 2.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Taiwan Fire Marine vs. Mega Financial Holding
Performance |
| Timeline |
| Taiwan Fire Marine |
| Mega Financial Holding |
Taiwan Fire and Mega Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Fire and Mega Financial
The main advantage of trading using opposite Taiwan Fire and Mega Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Fire position performs unexpectedly, Mega 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 Mega Financial will offset losses from the drop in Mega Financial's long position.| Taiwan Fire vs. Mega Financial Holding | Taiwan Fire vs. Yuanta Financial Holdings | Taiwan Fire vs. ESUN Financial Holding | Taiwan Fire vs. Taiwan Cooperative Financial |
| Mega Financial vs. CTBC Financial Holding | Mega Financial vs. Fubon Financial Holding | Mega Financial vs. First Financial Holding | Mega Financial vs. Cathay 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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