Correlation Between Taishin Financial and Hua Nan
Can any of the company-specific risk be diversified away by investing in both Taishin Financial and Hua Nan 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 Hua Nan 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 Hua Nan Financial, you can compare the effects of market volatilities on Taishin Financial and Hua Nan 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 Hua Nan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taishin Financial and Hua Nan.
Diversification Opportunities for Taishin Financial and Hua Nan
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taishin and Hua is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Taishin Financial Holding and Hua Nan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Nan Financial 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 Hua Nan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Nan Financial has no effect on the direction of Taishin Financial i.e., Taishin Financial and Hua Nan go up and down completely randomly.
Pair Corralation between Taishin Financial and Hua Nan
Assuming the 90 days trading horizon Taishin Financial Holding is expected to under-perform the Hua Nan. But the stock apears to be less risky and, when comparing its historical volatility, Taishin Financial Holding is 1.8 times less risky than Hua Nan. The stock trades about -0.06 of its potential returns per unit of risk. The Hua Nan Financial is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 2,640 in Hua Nan Financial on November 3, 2024 and sell it today you would earn a total of 160.00 from holding Hua Nan Financial or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taishin Financial Holding vs. Hua Nan Financial
Performance |
| Timeline |
| Taishin Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Hua Nan Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Taishin Financial and Hua Nan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taishin Financial and Hua Nan
The main advantage of trading using opposite Taishin Financial and Hua Nan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taishin Financial position performs unexpectedly, Hua Nan 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 Hua Nan will offset losses from the drop in Hua Nan's long position.The idea behind Taishin Financial Holding and Hua Nan Financial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Transaction History View history of all your transactions and understand their impact on performance |