Correlation Between Hua Nan and Taiwan Business
Can any of the company-specific risk be diversified away by investing in both Hua Nan and Taiwan Business 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 Hua Nan and Taiwan Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hua Nan Financial and Taiwan Business Bank, you can compare the effects of market volatilities on Hua Nan and Taiwan Business 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 Hua Nan with a short position of Taiwan Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Nan and Taiwan Business.
Diversification Opportunities for Hua Nan and Taiwan Business
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hua and Taiwan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hua Nan Financial and Taiwan Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Business Bank and Hua Nan 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 Hua Nan Financial are associated (or correlated) with Taiwan Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Business Bank has no effect on the direction of Hua Nan i.e., Hua Nan and Taiwan Business go up and down completely randomly.
Pair Corralation between Hua Nan and Taiwan Business
Assuming the 90 days trading horizon Hua Nan Financial is expected to generate 0.69 times more return on investment than Taiwan Business. However, Hua Nan Financial is 1.45 times less risky than Taiwan Business. It trades about 0.19 of its potential returns per unit of risk. Taiwan Business Bank is currently generating about -0.11 per unit of risk. If you would invest 2,535 in Hua Nan Financial on August 30, 2024 and sell it today you would earn a total of 85.00 from holding Hua Nan Financial or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hua Nan Financial vs. Taiwan Business Bank
Performance |
| Timeline |
| Hua Nan Financial |
| Taiwan Business Bank |
Hua Nan and Taiwan Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hua Nan and Taiwan Business
The main advantage of trading using opposite Hua Nan and Taiwan Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Nan position performs unexpectedly, Taiwan Business 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 Taiwan Business will offset losses from the drop in Taiwan Business' long position.| Hua Nan vs. Taiwan Secom Co | Hua Nan vs. TTET Union Corp | Hua Nan vs. China Steel Chemical | Hua Nan vs. Taiwan Shin Kong |
| Taiwan Business vs. First Financial Holding | Taiwan Business vs. Chang Hwa Commercial | Taiwan Business vs. Sinopac Financial Holdings | Taiwan Business vs. Taishin 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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