Correlation Between ABC Taiwan and GeneFerm Biotechnology
Can any of the company-specific risk be diversified away by investing in both ABC Taiwan and GeneFerm Biotechnology 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 GeneFerm Biotechnology 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 GeneFerm Biotechnology Co, you can compare the effects of market volatilities on ABC Taiwan and GeneFerm Biotechnology 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 GeneFerm Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC Taiwan and GeneFerm Biotechnology.
Diversification Opportunities for ABC Taiwan and GeneFerm Biotechnology
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ABC and GeneFerm is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ABC Taiwan Electronics and GeneFerm Biotechnology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeneFerm Biotechnology 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 GeneFerm Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeneFerm Biotechnology has no effect on the direction of ABC Taiwan i.e., ABC Taiwan and GeneFerm Biotechnology go up and down completely randomly.
Pair Corralation between ABC Taiwan and GeneFerm Biotechnology
Assuming the 90 days trading horizon ABC Taiwan is expected to generate 1.16 times less return on investment than GeneFerm Biotechnology. But when comparing it to its historical volatility, ABC Taiwan Electronics is 1.65 times less risky than GeneFerm Biotechnology. It trades about 0.11 of its potential returns per unit of risk. GeneFerm Biotechnology Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,860 in GeneFerm Biotechnology Co on September 4, 2024 and sell it today you would earn a total of 150.00 from holding GeneFerm Biotechnology Co or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABC Taiwan Electronics vs. GeneFerm Biotechnology Co
Performance |
| Timeline |
| ABC Taiwan Electronics |
| GeneFerm Biotechnology |
ABC Taiwan and GeneFerm Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABC Taiwan and GeneFerm Biotechnology
The main advantage of trading using opposite ABC Taiwan and GeneFerm Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC Taiwan position performs unexpectedly, GeneFerm Biotechnology 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 GeneFerm Biotechnology will offset losses from the drop in GeneFerm Biotechnology's long position.| ABC Taiwan vs. GeneFerm Biotechnology Co | ABC Taiwan vs. Tehmag Foods | ABC Taiwan vs. Hunya Foods Co | ABC Taiwan vs. Sunmax Biotechnology Co |
| GeneFerm Biotechnology vs. Ruentex Development Co | GeneFerm Biotechnology vs. Symtek Automation Asia | GeneFerm Biotechnology vs. CTCI Corp | GeneFerm Biotechnology vs. Information Technology Total |
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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