Correlation Between First Financial and Taishin Financial
Can any of the company-specific risk be diversified away by investing in both First 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 First 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 First Financial Holding and Taishin Financial Holding, you can compare the effects of market volatilities on First 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 First Financial with a short position of Taishin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Taishin Financial.
Diversification Opportunities for First Financial and Taishin Financial
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and Taishin is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding First 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 First 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 First 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 First Financial i.e., First Financial and Taishin Financial go up and down completely randomly.
Pair Corralation between First Financial and Taishin Financial
Assuming the 90 days trading horizon First Financial Holding is expected to under-perform the Taishin Financial. In addition to that, First Financial is 3.1 times more volatile than Taishin Financial Holding. It trades about -0.03 of its total potential returns per unit of risk. Taishin Financial Holding is currently generating about 0.06 per unit of volatility. If you would invest 5,140 in Taishin Financial Holding on November 7, 2024 and sell it today you would earn a total of 10.00 from holding Taishin Financial Holding or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Holding vs. Taishin Financial Holding
Performance |
| Timeline |
| First Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Taishin Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
First Financial and Taishin Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Taishin Financial
The main advantage of trading using opposite First Financial and Taishin Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First 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 First 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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