Correlation Between ESUN Financial and Taishin Financial
Can any of the company-specific risk be diversified away by investing in both ESUN Financial 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 ESUN Financial and Taishin Financial 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 Taishin Financial Holding, you can compare the effects of market volatilities on ESUN Financial 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 ESUN Financial with a short position of Taishin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Taishin Financial.
Diversification Opportunities for ESUN Financial and Taishin Financial
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ESUN and Taishin is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding 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 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 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 ESUN Financial i.e., ESUN Financial and Taishin Financial go up and down completely randomly.
Pair Corralation between ESUN Financial and Taishin Financial
Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 4.05 times more return on investment than Taishin Financial. However, ESUN Financial is 4.05 times more volatile than Taishin Financial Holding. It trades about 0.35 of its potential returns per unit of risk. Taishin Financial Holding is currently generating about 0.06 per unit of risk. If you would invest 2,725 in ESUN Financial Holding on November 7, 2024 and sell it today you would earn a total of 135.00 from holding ESUN Financial Holding or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 93.75% |
| Values | Daily Returns |
ESUN Financial Holding vs. Taishin Financial Holding
Performance |
| Timeline |
| ESUN Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Taishin Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
ESUN Financial and Taishin Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESUN Financial and Taishin Financial
The main advantage of trading using opposite ESUN Financial and Taishin Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESUN Financial 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.The idea behind ESUN Financial Holding and Taishin Financial Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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