Correlation Between Simple Mart and ABC Taiwan
Can any of the company-specific risk be diversified away by investing in both Simple Mart and ABC Taiwan 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 Simple Mart and ABC Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Simple Mart Retail and ABC Taiwan Electronics, you can compare the effects of market volatilities on Simple Mart and ABC Taiwan 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 Simple Mart with a short position of ABC Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simple Mart and ABC Taiwan.
Diversification Opportunities for Simple Mart and ABC Taiwan
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Simple and ABC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Simple Mart Retail and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics and Simple Mart 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 Simple Mart Retail are associated (or correlated) with ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of Simple Mart i.e., Simple Mart and ABC Taiwan go up and down completely randomly.
Pair Corralation between Simple Mart and ABC Taiwan
Assuming the 90 days trading horizon Simple Mart Retail is expected to generate 0.67 times more return on investment than ABC Taiwan. However, Simple Mart Retail is 1.48 times less risky than ABC Taiwan. It trades about -0.03 of its potential returns per unit of risk. ABC Taiwan Electronics is currently generating about -0.18 per unit of risk. If you would invest 4,025 in Simple Mart Retail on October 23, 2024 and sell it today you would lose (30.00) from holding Simple Mart Retail or give up 0.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simple Mart Retail vs. ABC Taiwan Electronics
Performance |
| Timeline |
| Simple Mart Retail |
| ABC Taiwan Electronics |
Simple Mart and ABC Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simple Mart and ABC Taiwan
The main advantage of trading using opposite Simple Mart and ABC Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simple Mart position performs unexpectedly, ABC Taiwan 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 ABC Taiwan will offset losses from the drop in ABC Taiwan's long position.| Simple Mart vs. Hi Lai Foods Co | Simple Mart vs. Sesoda Corp | Simple Mart vs. Formosa Chemicals Fibre | Simple Mart vs. Level Biotechnology |
| ABC Taiwan vs. Elite Material Co | ABC Taiwan vs. Simple Mart Retail | ABC Taiwan vs. ESUN Financial Holding | ABC Taiwan vs. Taichung Commercial Bank |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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