Correlation Between Pacific Hospital and ABC Taiwan
Can any of the company-specific risk be diversified away by investing in both Pacific Hospital and ABC Taiwan 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 Pacific Hospital and ABC Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Hospital Supply and ABC Taiwan Electronics, you can compare the effects of market volatilities on Pacific Hospital and ABC Taiwan 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 Pacific Hospital with a short position of ABC Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Hospital and ABC Taiwan.
Diversification Opportunities for Pacific Hospital and ABC Taiwan
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pacific and ABC is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Hospital Supply and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics and Pacific Hospital 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 Pacific Hospital Supply are associated (or correlated) with ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of Pacific Hospital i.e., Pacific Hospital and ABC Taiwan go up and down completely randomly.
Pair Corralation between Pacific Hospital and ABC Taiwan
Assuming the 90 days trading horizon Pacific Hospital Supply is expected to under-perform the ABC Taiwan. But the stock apears to be less risky and, when comparing its historical volatility, Pacific Hospital Supply is 2.44 times less risky than ABC Taiwan. The stock trades about -0.04 of its potential returns per unit of risk. The ABC Taiwan Electronics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,205 in ABC Taiwan Electronics on August 30, 2024 and sell it today you would earn a total of 75.00 from holding ABC Taiwan Electronics or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Pacific Hospital Supply vs. ABC Taiwan Electronics
Performance |
| Timeline |
| Pacific Hospital Supply |
| ABC Taiwan Electronics |
Pacific Hospital and ABC Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Hospital and ABC Taiwan
The main advantage of trading using opposite Pacific Hospital and ABC Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Hospital position performs unexpectedly, ABC Taiwan 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 ABC Taiwan will offset losses from the drop in ABC Taiwan's long position.| Pacific Hospital vs. StShine Optical Co | Pacific Hospital vs. Bioteque | Pacific Hospital vs. United Orthopedic | Pacific Hospital vs. TTY Biopharm Co |
| ABC Taiwan vs. Hon Hai Precision | ABC Taiwan vs. Delta Electronics | ABC Taiwan vs. LARGAN Precision Co | ABC Taiwan vs. E Ink Holdings |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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