Correlation Between Taiwan Tea and Leofoo Development
Can any of the company-specific risk be diversified away by investing in both Taiwan Tea and Leofoo Development 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 Leofoo Development 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 Leofoo Development Co, you can compare the effects of market volatilities on Taiwan Tea and Leofoo Development 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 Leofoo Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Tea and Leofoo Development.
Diversification Opportunities for Taiwan Tea and Leofoo Development
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Taiwan and Leofoo is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Tea Corp and Leofoo Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leofoo Development 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 Leofoo Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leofoo Development has no effect on the direction of Taiwan Tea i.e., Taiwan Tea and Leofoo Development go up and down completely randomly.
Pair Corralation between Taiwan Tea and Leofoo Development
Assuming the 90 days trading horizon Taiwan Tea Corp is expected to under-perform the Leofoo Development. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Tea Corp is 1.2 times less risky than Leofoo Development. The stock trades about -0.14 of its potential returns per unit of risk. The Leofoo Development Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,770 in Leofoo Development Co on October 25, 2024 and sell it today you would earn a total of 80.00 from holding Leofoo Development Co or generate 4.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Tea Corp vs. Leofoo Development Co
Performance |
| Timeline |
| Taiwan Tea Corp |
| Leofoo Development |
Taiwan Tea and Leofoo Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Tea and Leofoo Development
The main advantage of trading using opposite Taiwan Tea and Leofoo Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Tea position performs unexpectedly, Leofoo Development 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 Leofoo Development will offset losses from the drop in Leofoo Development's 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 |
| Leofoo Development vs. First Hotel Co | Leofoo Development vs. Hotel Holiday Garden | Leofoo Development vs. Taiwan Tea Corp | Leofoo Development vs. Far Eastern Department |
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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