Correlation Between Taishin Financial and Central Reinsurance
Can any of the company-specific risk be diversified away by investing in both Taishin Financial and Central Reinsurance 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 Taishin Financial and Central Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taishin Financial Holding and Central Reinsurance Corp, you can compare the effects of market volatilities on Taishin Financial and Central Reinsurance 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 Taishin Financial with a short position of Central Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taishin Financial and Central Reinsurance.
Diversification Opportunities for Taishin Financial and Central Reinsurance
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Taishin and Central is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Taishin Financial Holding and Central Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Reinsurance Corp and Taishin 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 Taishin Financial Holding are associated (or correlated) with Central Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Reinsurance Corp has no effect on the direction of Taishin Financial i.e., Taishin Financial and Central Reinsurance go up and down completely randomly.
Pair Corralation between Taishin Financial and Central Reinsurance
Assuming the 90 days trading horizon Taishin Financial is expected to generate 1.47 times less return on investment than Central Reinsurance. But when comparing it to its historical volatility, Taishin Financial Holding is 1.26 times less risky than Central Reinsurance. It trades about 0.05 of its potential returns per unit of risk. Central Reinsurance Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,900 in Central Reinsurance Corp on September 4, 2024 and sell it today you would earn a total of 705.00 from holding Central Reinsurance Corp or generate 37.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taishin Financial Holding vs. Central Reinsurance Corp
Performance |
| Timeline |
| Taishin Financial Holding |
| Central Reinsurance Corp |
Taishin Financial and Central Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taishin Financial and Central Reinsurance
The main advantage of trading using opposite Taishin Financial and Central Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taishin Financial position performs unexpectedly, Central Reinsurance 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 Central Reinsurance will offset losses from the drop in Central Reinsurance's long position.The idea behind Taishin Financial Holding and Central Reinsurance Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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