Correlation Between Taiwan Tea and Collins
Can any of the company-specific risk be diversified away by investing in both Taiwan Tea and Collins 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 Collins 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 Collins Co, you can compare the effects of market volatilities on Taiwan Tea and Collins 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 Collins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Tea and Collins.
Diversification Opportunities for Taiwan Tea and Collins
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Collins is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Tea Corp and Collins Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins 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 Collins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins has no effect on the direction of Taiwan Tea i.e., Taiwan Tea and Collins go up and down completely randomly.
Pair Corralation between Taiwan Tea and Collins
Assuming the 90 days trading horizon Taiwan Tea Corp is expected to under-perform the Collins. In addition to that, Taiwan Tea is 1.01 times more volatile than Collins Co. It trades about 0.0 of its total potential returns per unit of risk. Collins Co is currently generating about 0.01 per unit of volatility. If you would invest 1,730 in Collins Co on September 4, 2024 and sell it today you would earn a total of 70.00 from holding Collins Co or generate 4.05% 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. Collins Co
Performance |
| Timeline |
| Taiwan Tea Corp |
| Collins |
Taiwan Tea and Collins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Tea and Collins
The main advantage of trading using opposite Taiwan Tea and Collins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Tea position performs unexpectedly, Collins 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 Collins will offset losses from the drop in Collins' long position.The idea behind Taiwan Tea Corp and Collins Co 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.| Collins vs. Taiwan Tea Corp | Collins vs. Far Eastern Department | Collins vs. First Hotel Co | Collins vs. Les Enphants Co |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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