Correlation Between ABC Taiwan and I Jang
Can any of the company-specific risk be diversified away by investing in both ABC Taiwan and I Jang 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 I Jang 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 I Jang Industrial, you can compare the effects of market volatilities on ABC Taiwan and I Jang 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 I Jang. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC Taiwan and I Jang.
Diversification Opportunities for ABC Taiwan and I Jang
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ABC and 8342 is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding ABC Taiwan Electronics and I Jang Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Jang Industrial 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 I Jang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Jang Industrial has no effect on the direction of ABC Taiwan i.e., ABC Taiwan and I Jang go up and down completely randomly.
Pair Corralation between ABC Taiwan and I Jang
Assuming the 90 days trading horizon ABC Taiwan Electronics is expected to under-perform the I Jang. But the stock apears to be less risky and, when comparing its historical volatility, ABC Taiwan Electronics is 1.2 times less risky than I Jang. The stock trades about -0.04 of its potential returns per unit of risk. The I Jang Industrial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,920 in I Jang Industrial on October 13, 2024 and sell it today you would earn a total of 960.00 from holding I Jang Industrial or generate 12.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABC Taiwan Electronics vs. I Jang Industrial
Performance |
| Timeline |
| ABC Taiwan Electronics |
| I Jang Industrial |
ABC Taiwan and I Jang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABC Taiwan and I Jang
The main advantage of trading using opposite ABC Taiwan and I Jang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC Taiwan position performs unexpectedly, I Jang 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 I Jang will offset losses from the drop in I Jang's long position.| ABC Taiwan vs. Wei Chuan Foods | ABC Taiwan vs. Galaxy Software Services | ABC Taiwan vs. Compal Broadband Networks | ABC Taiwan vs. Chung Lien Transportation |
| I Jang vs. AVerMedia Technologies | I Jang vs. Min Aik Technology | I Jang vs. Uniform Industrial Corp | I Jang 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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