Correlation Between ESUN Financial and Taiwan Cement
Can any of the company-specific risk be diversified away by investing in both ESUN Financial and Taiwan Cement 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 ESUN Financial and Taiwan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESUN Financial Holding and Taiwan Cement Corp, you can compare the effects of market volatilities on ESUN Financial and Taiwan Cement 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 ESUN Financial with a short position of Taiwan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Taiwan Cement.
Diversification Opportunities for ESUN Financial and Taiwan Cement
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between ESUN and Taiwan is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and ESUN Financial 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 ESUN Financial Holding are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of ESUN Financial i.e., ESUN Financial and Taiwan Cement go up and down completely randomly.
Pair Corralation between ESUN Financial and Taiwan Cement
Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 1.14 times more return on investment than Taiwan Cement. However, ESUN Financial is 1.14 times more volatile than Taiwan Cement Corp. It trades about 0.03 of its potential returns per unit of risk. Taiwan Cement Corp is currently generating about -0.01 per unit of risk. If you would invest 2,560 in ESUN Financial Holding on September 4, 2024 and sell it today you would earn a total of 175.00 from holding ESUN Financial Holding or generate 6.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESUN Financial Holding vs. Taiwan Cement Corp
Performance |
| Timeline |
| ESUN Financial Holding |
| Taiwan Cement Corp |
ESUN Financial and Taiwan Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESUN Financial and Taiwan Cement
The main advantage of trading using opposite ESUN Financial and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESUN Financial position performs unexpectedly, Taiwan Cement 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 Cement will offset losses from the drop in Taiwan Cement's long position.| ESUN Financial vs. Central Reinsurance Corp | ESUN Financial vs. Huaku Development Co | ESUN Financial vs. Chailease Holding Co | ESUN Financial vs. CTBC Financial Holding |
| Taiwan Cement vs. Asia Cement Corp | Taiwan Cement vs. Formosa Plastics Corp | Taiwan Cement vs. Nan Ya Plastics | Taiwan Cement vs. China Steel Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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