Correlation Between Taiwan Tea and Super Dragon
Can any of the company-specific risk be diversified away by investing in both Taiwan Tea and Super Dragon 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 Super Dragon 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 Super Dragon Technology, you can compare the effects of market volatilities on Taiwan Tea and Super Dragon 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 Super Dragon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Tea and Super Dragon.
Diversification Opportunities for Taiwan Tea and Super Dragon
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Super is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Tea Corp and Super Dragon Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Super Dragon Technology 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 Super Dragon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Super Dragon Technology has no effect on the direction of Taiwan Tea i.e., Taiwan Tea and Super Dragon go up and down completely randomly.
Pair Corralation between Taiwan Tea and Super Dragon
Assuming the 90 days trading horizon Taiwan Tea Corp is expected to generate 0.62 times more return on investment than Super Dragon. However, Taiwan Tea Corp is 1.6 times less risky than Super Dragon. It trades about 0.0 of its potential returns per unit of risk. Super Dragon Technology is currently generating about -0.09 per unit of risk. If you would invest 2,085 in Taiwan Tea Corp on August 28, 2024 and sell it today you would lose (5.00) from holding Taiwan Tea Corp or give up 0.24% 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. Super Dragon Technology
Performance |
| Timeline |
| Taiwan Tea Corp |
| Super Dragon Technology |
Taiwan Tea and Super Dragon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Tea and Super Dragon
The main advantage of trading using opposite Taiwan Tea and Super Dragon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Tea position performs unexpectedly, Super Dragon 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 Super Dragon will offset losses from the drop in Super Dragon's long position.| Taiwan Tea vs. Taiwan Cement Corp | Taiwan Tea vs. Ruentex Development Co | Taiwan Tea vs. Symtek Automation Asia | Taiwan Tea vs. CTCI Corp |
| Super Dragon vs. Ton Yi Industrial | Super Dragon vs. Shinih Enterprise Co | Super Dragon vs. Kingcan Holdings | Super Dragon vs. Zinwell |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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