Correlation Between China Development and Taishin Financial
Can any of the company-specific risk be diversified away by investing in both China Development and Taishin 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 China Development and Taishin Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Development Financial and Taishin Financial Holding, you can compare the effects of market volatilities on China Development and Taishin 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 China Development with a short position of Taishin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Taishin Financial.
Diversification Opportunities for China Development and Taishin Financial
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Taishin is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Taishin Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taishin Financial Holding and China Development 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 China Development Financial are associated (or correlated) with Taishin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taishin Financial Holding has no effect on the direction of China Development i.e., China Development and Taishin Financial go up and down completely randomly.
Pair Corralation between China Development and Taishin Financial
Assuming the 90 days trading horizon China Development Financial is expected to under-perform the Taishin Financial. In addition to that, China Development is 1.7 times more volatile than Taishin Financial Holding. It trades about -0.13 of its total potential returns per unit of risk. Taishin Financial Holding is currently generating about -0.07 per unit of volatility. If you would invest 1,750 in Taishin Financial Holding on October 23, 2024 and sell it today you would lose (20.00) from holding Taishin Financial Holding or give up 1.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
China Development Financial vs. Taishin Financial Holding
Performance |
| Timeline |
| China Development |
| Taishin Financial Holding |
China Development and Taishin Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Taishin Financial
The main advantage of trading using opposite China Development and Taishin Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Taishin 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 Taishin Financial will offset losses from the drop in Taishin Financial's long position.| China Development vs. Cathay Financial Holding | China Development vs. Mega Financial Holding | China Development vs. CTBC Financial Holding | China Development vs. Fubon Financial Holding |
| Taishin Financial vs. CTBC Financial Holding | Taishin Financial vs. First Financial Holding | Taishin Financial vs. Mega Financial Holding | Taishin 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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