Correlation Between ASE Industrial and Taiwan Hopax
Can any of the company-specific risk be diversified away by investing in both ASE Industrial and Taiwan Hopax 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 ASE Industrial and Taiwan Hopax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASE Industrial Holding and Taiwan Hopax Chemsistry, you can compare the effects of market volatilities on ASE Industrial and Taiwan Hopax 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 ASE Industrial with a short position of Taiwan Hopax. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Taiwan Hopax.
Diversification Opportunities for ASE Industrial and Taiwan Hopax
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ASE and Taiwan is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Taiwan Hopax Chemsistry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hopax Chemsistry and ASE Industrial 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 ASE Industrial Holding are associated (or correlated) with Taiwan Hopax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hopax Chemsistry has no effect on the direction of ASE Industrial i.e., ASE Industrial and Taiwan Hopax go up and down completely randomly.
Pair Corralation between ASE Industrial and Taiwan Hopax
Assuming the 90 days trading horizon ASE Industrial Holding is expected to generate 1.77 times more return on investment than Taiwan Hopax. However, ASE Industrial is 1.77 times more volatile than Taiwan Hopax Chemsistry. It trades about 0.26 of its potential returns per unit of risk. Taiwan Hopax Chemsistry is currently generating about -0.09 per unit of risk. If you would invest 16,050 in ASE Industrial Holding on November 2, 2024 and sell it today you would earn a total of 1,650 from holding ASE Industrial Holding or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASE Industrial Holding vs. Taiwan Hopax Chemsistry
Performance |
| Timeline |
| ASE Industrial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Taiwan Hopax Chemsistry |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ASE Industrial and Taiwan Hopax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and Taiwan Hopax
The main advantage of trading using opposite ASE Industrial and Taiwan Hopax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial position performs unexpectedly, Taiwan Hopax 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 Taiwan Hopax will offset losses from the drop in Taiwan Hopax's long position.The idea behind ASE Industrial Holding and Taiwan Hopax Chemsistry pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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