Correlation Between Taiwan Business and First Financial
Can any of the company-specific risk be diversified away by investing in both Taiwan Business and First 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 First 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 First Financial Holding, you can compare the effects of market volatilities on Taiwan Business and First 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 First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Business and First Financial.
Diversification Opportunities for Taiwan Business and First Financial
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Business Bank and First Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Holding 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 First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Holding has no effect on the direction of Taiwan Business i.e., Taiwan Business and First Financial go up and down completely randomly.
Pair Corralation between Taiwan Business and First Financial
Assuming the 90 days trading horizon Taiwan Business Bank is expected to under-perform the First Financial. In addition to that, Taiwan Business is 1.03 times more volatile than First Financial Holding. It trades about -0.11 of its total potential returns per unit of risk. First Financial Holding is currently generating about 0.06 per unit of volatility. If you would invest 2,710 in First Financial Holding on August 30, 2024 and sell it today you would earn a total of 40.00 from holding First Financial Holding or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Business Bank vs. First Financial Holding
Performance |
| Timeline |
| Taiwan Business Bank |
| First Financial Holding |
Taiwan Business and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Business and First Financial
The main advantage of trading using opposite Taiwan Business and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Business position performs unexpectedly, First 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 First Financial will offset losses from the drop in First 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 |
| First Financial vs. Mega Financial Holding | First Financial vs. CTBC Financial Holding | First Financial vs. Hua Nan Financial | First Financial 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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