Correlation Between Taiwan Tea and Taiwan Glass
Can any of the company-specific risk be diversified away by investing in both Taiwan Tea and Taiwan Glass 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 Taiwan Tea and Taiwan Glass into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Tea Corp and Taiwan Glass Ind, you can compare the effects of market volatilities on Taiwan Tea and Taiwan Glass 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 Taiwan Tea with a short position of Taiwan Glass. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Tea and Taiwan Glass.
Diversification Opportunities for Taiwan Tea and Taiwan Glass
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Taiwan and Taiwan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Tea Corp and Taiwan Glass Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Glass Ind and Taiwan Tea 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 Taiwan Tea Corp are associated (or correlated) with Taiwan Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Glass Ind has no effect on the direction of Taiwan Tea i.e., Taiwan Tea and Taiwan Glass go up and down completely randomly.
Pair Corralation between Taiwan Tea and Taiwan Glass
Assuming the 90 days trading horizon Taiwan Tea is expected to generate 1.77 times less return on investment than Taiwan Glass. But when comparing it to its historical volatility, Taiwan Tea Corp is 1.13 times less risky than Taiwan Glass. It trades about 0.0 of its potential returns per unit of risk. Taiwan Glass Ind is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,145 in Taiwan Glass Ind on August 26, 2024 and sell it today you would lose (80.00) from holding Taiwan Glass Ind or give up 3.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Tea Corp vs. Taiwan Glass Ind
Performance |
| Timeline |
| Taiwan Tea Corp |
| Taiwan Glass Ind |
Taiwan Tea and Taiwan Glass Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Tea and Taiwan Glass
The main advantage of trading using opposite Taiwan Tea and Taiwan Glass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Tea position performs unexpectedly, Taiwan Glass 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 Glass will offset losses from the drop in Taiwan Glass' long position.| Taiwan Tea vs. Far Eastern Department | Taiwan Tea vs. BES Engineering Co | Taiwan Tea vs. Ton Yi Industrial | Taiwan Tea vs. Evergreen International Storage |
| Taiwan Glass vs. Sunny Friend Environmental | Taiwan Glass vs. TTET Union Corp | Taiwan Glass vs. ECOVE Environment Corp | Taiwan Glass vs. Yulon Finance Corp |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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