Correlation Between Taiwan Tea and Chang Hwa
Can any of the company-specific risk be diversified away by investing in both Taiwan Tea and Chang Hwa 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 Chang Hwa 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 Chang Hwa Commercial, you can compare the effects of market volatilities on Taiwan Tea and Chang Hwa 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 Chang Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Tea and Chang Hwa.
Diversification Opportunities for Taiwan Tea and Chang Hwa
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Chang is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Tea Corp and Chang Hwa Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chang Hwa Commercial 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 Chang Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chang Hwa Commercial has no effect on the direction of Taiwan Tea i.e., Taiwan Tea and Chang Hwa go up and down completely randomly.
Pair Corralation between Taiwan Tea and Chang Hwa
Assuming the 90 days trading horizon Taiwan Tea Corp is expected to under-perform the Chang Hwa. In addition to that, Taiwan Tea is 2.69 times more volatile than Chang Hwa Commercial. It trades about -0.1 of its total potential returns per unit of risk. Chang Hwa Commercial is currently generating about 0.05 per unit of volatility. If you would invest 1,765 in Chang Hwa Commercial on August 30, 2024 and sell it today you would earn a total of 10.00 from holding Chang Hwa Commercial or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Tea Corp vs. Chang Hwa Commercial
Performance |
| Timeline |
| Taiwan Tea Corp |
| Chang Hwa Commercial |
Taiwan Tea and Chang Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Tea and Chang Hwa
The main advantage of trading using opposite Taiwan Tea and Chang Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Tea position performs unexpectedly, Chang Hwa 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 Chang Hwa will offset losses from the drop in Chang Hwa'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 |
| Chang Hwa vs. Taiwan Secom Co | Chang Hwa vs. TTET Union Corp | Chang Hwa vs. China Steel Chemical | Chang Hwa vs. Taiwan Shin Kong |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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