Correlation Between ESUN Financial and Taiwan High
Can any of the company-specific risk be diversified away by investing in both ESUN Financial and Taiwan High 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 High 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 High Speed, you can compare the effects of market volatilities on ESUN Financial and Taiwan High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Taiwan High.
Diversification Opportunities for ESUN Financial and Taiwan High
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ESUN and Taiwan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Taiwan High Speed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan High Speed 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 High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan High Speed has no effect on the direction of ESUN Financial i.e., ESUN Financial and Taiwan High go up and down completely randomly.
Pair Corralation between ESUN Financial and Taiwan High
Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 0.82 times more return on investment than Taiwan High. However, ESUN Financial Holding is 1.22 times less risky than Taiwan High. It trades about 0.2 of its potential returns per unit of risk. Taiwan High Speed is currently generating about -0.12 per unit of risk. If you would invest 2,710 in ESUN Financial Holding on October 29, 2024 and sell it today you would earn a total of 70.00 from holding ESUN Financial Holding or generate 2.58% 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 High Speed
Performance |
| Timeline |
| ESUN Financial Holding |
| Taiwan High Speed |
ESUN Financial and Taiwan High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESUN Financial and Taiwan High
The main advantage of trading using opposite ESUN Financial and Taiwan High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESUN Financial position performs unexpectedly, Taiwan High 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 High will offset losses from the drop in Taiwan High's long position.| ESUN Financial vs. Mega Financial Holding | ESUN Financial vs. CTBC Financial Holding | ESUN Financial vs. First Financial Holding | ESUN Financial vs. Fubon Financial Holding |
| Taiwan High vs. Chunghwa Telecom Co | Taiwan High vs. ESUN Financial Holding | Taiwan High vs. Mega Financial Holding | Taiwan High vs. Taiwan Cement 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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