Correlation Between ABC Taiwan and First Hotel
Can any of the company-specific risk be diversified away by investing in both ABC Taiwan and First Hotel 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 First Hotel 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 First Hotel Co, you can compare the effects of market volatilities on ABC Taiwan and First Hotel 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 First Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC Taiwan and First Hotel.
Diversification Opportunities for ABC Taiwan and First Hotel
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ABC and First is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ABC Taiwan Electronics and First Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hotel 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 First Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hotel has no effect on the direction of ABC Taiwan i.e., ABC Taiwan and First Hotel go up and down completely randomly.
Pair Corralation between ABC Taiwan and First Hotel
Assuming the 90 days trading horizon ABC Taiwan Electronics is expected to under-perform the First Hotel. In addition to that, ABC Taiwan is 1.3 times more volatile than First Hotel Co. It trades about 0.0 of its total potential returns per unit of risk. First Hotel Co is currently generating about 0.01 per unit of volatility. If you would invest 1,420 in First Hotel Co on September 1, 2024 and sell it today you would earn a total of 60.00 from holding First Hotel Co or generate 4.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABC Taiwan Electronics vs. First Hotel Co
Performance |
| Timeline |
| ABC Taiwan Electronics |
| First Hotel |
ABC Taiwan and First Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABC Taiwan and First Hotel
The main advantage of trading using opposite ABC Taiwan and First Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC Taiwan position performs unexpectedly, First Hotel 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 First Hotel will offset losses from the drop in First Hotel's long position.| ABC Taiwan vs. Chinese Maritime Transport | ABC Taiwan vs. Founding Construction Development | ABC Taiwan vs. Dawushan Farm Tech | ABC Taiwan vs. Chung Hsin Electric Machinery |
| First Hotel vs. Leofoo Development Co | First Hotel vs. Hotel Holiday Garden | First Hotel vs. Shin Shin Co | First Hotel vs. Hung Sheng Construction |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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