Correlation Between Double Bond and Taiwan Steel
Can any of the company-specific risk be diversified away by investing in both Double Bond and Taiwan Steel 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 Double Bond and Taiwan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Double Bond Chemical and Taiwan Steel Union, you can compare the effects of market volatilities on Double Bond and Taiwan Steel 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 Double Bond with a short position of Taiwan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Double Bond and Taiwan Steel.
Diversification Opportunities for Double Bond and Taiwan Steel
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Double and Taiwan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Double Bond Chemical and Taiwan Steel Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Steel Union and Double Bond 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 Double Bond Chemical are associated (or correlated) with Taiwan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Steel Union has no effect on the direction of Double Bond i.e., Double Bond and Taiwan Steel go up and down completely randomly.
Pair Corralation between Double Bond and Taiwan Steel
Assuming the 90 days trading horizon Double Bond Chemical is expected to generate 0.95 times more return on investment than Taiwan Steel. However, Double Bond Chemical is 1.06 times less risky than Taiwan Steel. It trades about -0.26 of its potential returns per unit of risk. Taiwan Steel Union is currently generating about -0.28 per unit of risk. If you would invest 4,650 in Double Bond Chemical on September 3, 2024 and sell it today you would lose (290.00) from holding Double Bond Chemical or give up 6.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Double Bond Chemical vs. Taiwan Steel Union
Performance |
| Timeline |
| Double Bond Chemical |
| Taiwan Steel Union |
Double Bond and Taiwan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Double Bond and Taiwan Steel
The main advantage of trading using opposite Double Bond and Taiwan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Double Bond position performs unexpectedly, Taiwan Steel 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 Steel will offset losses from the drop in Taiwan Steel's long position.| Double Bond vs. Delta Electronics | Double Bond vs. China Steel Chemical | Double Bond vs. WiseChip Semiconductor | Double Bond vs. Novatek Microelectronics Corp |
| Taiwan Steel vs. Cleanaway Co | Taiwan Steel vs. Taiwan Secom Co | Taiwan Steel vs. Sunny Friend Environmental | Taiwan Steel vs. TTET Union Corp |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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