Correlation Between Collins and Taiwan Tea
Can any of the company-specific risk be diversified away by investing in both Collins and Taiwan Tea 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 Collins and Taiwan Tea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collins Co and Taiwan Tea Corp, you can compare the effects of market volatilities on Collins and Taiwan Tea 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 Collins with a short position of Taiwan Tea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collins and Taiwan Tea.
Diversification Opportunities for Collins and Taiwan Tea
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Collins and Taiwan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Collins Co and Taiwan Tea Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Tea Corp and Collins 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 Collins Co are associated (or correlated) with Taiwan Tea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Tea Corp has no effect on the direction of Collins i.e., Collins and Taiwan Tea go up and down completely randomly.
Pair Corralation between Collins and Taiwan Tea
Assuming the 90 days trading horizon Collins Co is expected to under-perform the Taiwan Tea. But the stock apears to be less risky and, when comparing its historical volatility, Collins Co is 1.63 times less risky than Taiwan Tea. The stock trades about -0.14 of its potential returns per unit of risk. The Taiwan Tea Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,060 in Taiwan Tea Corp on September 3, 2024 and sell it today you would earn a total of 0.00 from holding Taiwan Tea Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Collins Co vs. Taiwan Tea Corp
Performance |
| Timeline |
| Collins |
| Taiwan Tea Corp |
Collins and Taiwan Tea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collins and Taiwan Tea
The main advantage of trading using opposite Collins and Taiwan Tea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins position performs unexpectedly, Taiwan Tea 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 Taiwan Tea will offset losses from the drop in Taiwan Tea's long position.| Collins vs. Taiwan Tea Corp | Collins vs. Far Eastern Department | Collins vs. First Hotel Co | Collins vs. Les Enphants Co |
| Taiwan Tea vs. Far Eastern Department | Taiwan Tea vs. BES Engineering Co | Taiwan Tea vs. Ton Yi Industrial | Taiwan Tea vs. Evergreen International Storage |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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