Correlation Between Taiwan Tea and Ton Yi
Can any of the company-specific risk be diversified away by investing in both Taiwan Tea and Ton Yi 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 Ton Yi 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 Ton Yi Industrial, you can compare the effects of market volatilities on Taiwan Tea and Ton Yi 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 Ton Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Tea and Ton Yi.
Diversification Opportunities for Taiwan Tea and Ton Yi
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Ton is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Tea Corp and Ton Yi Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ton Yi Industrial 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 Ton Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ton Yi Industrial has no effect on the direction of Taiwan Tea i.e., Taiwan Tea and Ton Yi go up and down completely randomly.
Pair Corralation between Taiwan Tea and Ton Yi
Assuming the 90 days trading horizon Taiwan Tea Corp is expected to generate 0.78 times more return on investment than Ton Yi. However, Taiwan Tea Corp is 1.28 times less risky than Ton Yi. It trades about -0.1 of its potential returns per unit of risk. Ton Yi Industrial is currently generating about -0.13 per unit of risk. If you would invest 2,130 in Taiwan Tea Corp on August 30, 2024 and sell it today you would lose (70.00) from holding Taiwan Tea Corp or give up 3.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Tea Corp vs. Ton Yi Industrial
Performance |
| Timeline |
| Taiwan Tea Corp |
| Ton Yi Industrial |
Taiwan Tea and Ton Yi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Tea and Ton Yi
The main advantage of trading using opposite Taiwan Tea and Ton Yi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Tea position performs unexpectedly, Ton Yi 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 Ton Yi will offset losses from the drop in Ton Yi'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 |
| Ton Yi vs. Far Eastern Department | Ton Yi vs. Chang Hwa Commercial | Ton Yi vs. Zinwell | Ton Yi 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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