Correlation Between Taiwan Business and Yuanta Financial
Can any of the company-specific risk be diversified away by investing in both Taiwan Business and Yuanta 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 Business and Yuanta Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Business Bank and Yuanta Financial Holdings, you can compare the effects of market volatilities on Taiwan Business and Yuanta 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 Business with a short position of Yuanta Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Business and Yuanta Financial.
Diversification Opportunities for Taiwan Business and Yuanta Financial
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Taiwan and Yuanta is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Business Bank and Yuanta Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Financial Holdings and Taiwan Business 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 Business Bank are associated (or correlated) with Yuanta Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Financial Holdings has no effect on the direction of Taiwan Business i.e., Taiwan Business and Yuanta Financial go up and down completely randomly.
Pair Corralation between Taiwan Business and Yuanta Financial
Assuming the 90 days trading horizon Taiwan Business Bank is expected to under-perform the Yuanta Financial. In addition to that, Taiwan Business is 1.01 times more volatile than Yuanta Financial Holdings. It trades about -0.11 of its total potential returns per unit of risk. Yuanta Financial Holdings is currently generating about 0.09 per unit of volatility. If you would invest 3,260 in Yuanta Financial Holdings on August 30, 2024 and sell it today you would earn a total of 70.00 from holding Yuanta Financial Holdings or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Business Bank vs. Yuanta Financial Holdings
Performance |
| Timeline |
| Taiwan Business Bank |
| Yuanta Financial Holdings |
Taiwan Business and Yuanta Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Business and Yuanta Financial
The main advantage of trading using opposite Taiwan Business and Yuanta Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Business position performs unexpectedly, Yuanta 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 Yuanta Financial will offset losses from the drop in Yuanta Financial's long position.| Taiwan Business vs. First Financial Holding | Taiwan Business vs. Chang Hwa Commercial | Taiwan Business vs. Sinopac Financial Holdings | Taiwan Business vs. Taishin Financial Holding |
| Yuanta Financial vs. Taiwan Secom Co | Yuanta Financial vs. TTET Union Corp | Yuanta Financial vs. China Steel Chemical | Yuanta Financial vs. Taiwan Shin Kong |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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