Correlation Between OBI Pharma and Taiwan Paiho
Can any of the company-specific risk be diversified away by investing in both OBI Pharma and Taiwan Paiho 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 OBI Pharma and Taiwan Paiho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OBI Pharma and Taiwan Paiho, you can compare the effects of market volatilities on OBI Pharma and Taiwan Paiho 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 OBI Pharma with a short position of Taiwan Paiho. Check out your portfolio center. Please also check ongoing floating volatility patterns of OBI Pharma and Taiwan Paiho.
Diversification Opportunities for OBI Pharma and Taiwan Paiho
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between OBI and Taiwan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding OBI Pharma and Taiwan Paiho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Paiho and OBI Pharma 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 OBI Pharma are associated (or correlated) with Taiwan Paiho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Paiho has no effect on the direction of OBI Pharma i.e., OBI Pharma and Taiwan Paiho go up and down completely randomly.
Pair Corralation between OBI Pharma and Taiwan Paiho
Assuming the 90 days trading horizon OBI Pharma is expected to under-perform the Taiwan Paiho. But the stock apears to be less risky and, when comparing its historical volatility, OBI Pharma is 1.06 times less risky than Taiwan Paiho. The stock trades about -0.2 of its potential returns per unit of risk. The Taiwan Paiho is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 8,150 in Taiwan Paiho on August 25, 2024 and sell it today you would lose (110.00) from holding Taiwan Paiho or give up 1.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
OBI Pharma vs. Taiwan Paiho
Performance |
| Timeline |
| OBI Pharma |
| Taiwan Paiho |
OBI Pharma and Taiwan Paiho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OBI Pharma and Taiwan Paiho
The main advantage of trading using opposite OBI Pharma and Taiwan Paiho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OBI Pharma position performs unexpectedly, Taiwan Paiho 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 Paiho will offset losses from the drop in Taiwan Paiho's long position.The idea behind OBI Pharma and Taiwan Paiho 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.| Taiwan Paiho vs. Feng Tay Enterprises | Taiwan Paiho vs. Makalot Industrial Co | Taiwan Paiho vs. Pou Chen Corp | Taiwan Paiho vs. Eclat Textile Co |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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