Correlation Between Taishin Financial and Bank of Kaohsiung
Can any of the company-specific risk be diversified away by investing in both Taishin Financial and Bank of Kaohsiung 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 Bank of Kaohsiung 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 Bank of Kaohsiung, you can compare the effects of market volatilities on Taishin Financial and Bank of Kaohsiung 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 Bank of Kaohsiung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taishin Financial and Bank of Kaohsiung.
Diversification Opportunities for Taishin Financial and Bank of Kaohsiung
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Taishin and Bank is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Taishin Financial Holding and Bank of Kaohsiung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Kaohsiung 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 Bank of Kaohsiung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Kaohsiung has no effect on the direction of Taishin Financial i.e., Taishin Financial and Bank of Kaohsiung go up and down completely randomly.
Pair Corralation between Taishin Financial and Bank of Kaohsiung
Assuming the 90 days trading horizon Taishin Financial is expected to generate 5.53 times less return on investment than Bank of Kaohsiung. But when comparing it to its historical volatility, Taishin Financial Holding is 2.72 times less risky than Bank of Kaohsiung. It trades about 0.1 of its potential returns per unit of risk. Bank of Kaohsiung is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,160 in Bank of Kaohsiung on December 9, 2024 and sell it today you would earn a total of 25.00 from holding Bank of Kaohsiung or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taishin Financial Holding vs. Bank of Kaohsiung
Performance |
| Timeline |
| Taishin Financial Holding |
| Bank of Kaohsiung |
Taishin Financial and Bank of Kaohsiung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taishin Financial and Bank of Kaohsiung
The main advantage of trading using opposite Taishin Financial and Bank of Kaohsiung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taishin Financial position performs unexpectedly, Bank of Kaohsiung 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 Bank of Kaohsiung will offset losses from the drop in Bank of Kaohsiung's long position.| Taishin Financial vs. ECOVE Environment Corp | ||
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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