Correlation Between ABC Taiwan and Goodway Machine
Can any of the company-specific risk be diversified away by investing in both ABC Taiwan and Goodway Machine 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 ABC Taiwan and Goodway Machine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABC Taiwan Electronics and Goodway Machine Corp, you can compare the effects of market volatilities on ABC Taiwan and Goodway Machine 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 ABC Taiwan with a short position of Goodway Machine. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC Taiwan and Goodway Machine.
Diversification Opportunities for ABC Taiwan and Goodway Machine
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ABC and Goodway is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding ABC Taiwan Electronics and Goodway Machine Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodway Machine Corp and ABC Taiwan 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 ABC Taiwan Electronics are associated (or correlated) with Goodway Machine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodway Machine Corp has no effect on the direction of ABC Taiwan i.e., ABC Taiwan and Goodway Machine go up and down completely randomly.
Pair Corralation between ABC Taiwan and Goodway Machine
Assuming the 90 days trading horizon ABC Taiwan Electronics is expected to generate 1.39 times more return on investment than Goodway Machine. However, ABC Taiwan is 1.39 times more volatile than Goodway Machine Corp. It trades about 0.0 of its potential returns per unit of risk. Goodway Machine Corp is currently generating about -0.08 per unit of risk. If you would invest 2,200 in ABC Taiwan Electronics on September 12, 2024 and sell it today you would lose (30.00) from holding ABC Taiwan Electronics or give up 1.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABC Taiwan Electronics vs. Goodway Machine Corp
Performance |
| Timeline |
| ABC Taiwan Electronics |
| Goodway Machine Corp |
ABC Taiwan and Goodway Machine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABC Taiwan and Goodway Machine
The main advantage of trading using opposite ABC Taiwan and Goodway Machine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC Taiwan position performs unexpectedly, Goodway Machine 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 Goodway Machine will offset losses from the drop in Goodway Machine's long position.| ABC Taiwan vs. ANJI Technology Co | ABC Taiwan vs. Emerging Display Technologies | ABC Taiwan vs. U Tech Media Corp | ABC Taiwan vs. Ruentex Development Co |
| Goodway Machine vs. Yang Ming Marine | Goodway Machine vs. Wan Hai Lines | Goodway Machine vs. U Ming Marine Transport | Goodway Machine vs. Taiwan Navigation 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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