Correlation Between Taiwan Speciality and Fubon Taiwan
Can any of the company-specific risk be diversified away by investing in both Taiwan Speciality and Fubon 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 Taiwan Speciality and Fubon Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Speciality Chemicals and Fubon Taiwan Technology, you can compare the effects of market volatilities on Taiwan Speciality and Fubon 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 Taiwan Speciality with a short position of Fubon Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Speciality and Fubon Taiwan.
Diversification Opportunities for Taiwan Speciality and Fubon Taiwan
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Taiwan and Fubon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Speciality Chemicals and Fubon Taiwan Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Taiwan Technology and Taiwan Speciality 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 Taiwan Speciality Chemicals are associated (or correlated) with Fubon Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Taiwan Technology has no effect on the direction of Taiwan Speciality i.e., Taiwan Speciality and Fubon Taiwan go up and down completely randomly.
Pair Corralation between Taiwan Speciality and Fubon Taiwan
Assuming the 90 days trading horizon Taiwan Speciality is expected to generate 2.82 times less return on investment than Fubon Taiwan. In addition to that, Taiwan Speciality is 1.96 times more volatile than Fubon Taiwan Technology. It trades about 0.01 of its total potential returns per unit of risk. Fubon Taiwan Technology is currently generating about 0.05 per unit of volatility. If you would invest 17,705 in Fubon Taiwan Technology on September 2, 2024 and sell it today you would earn a total of 685.00 from holding Fubon Taiwan Technology or generate 3.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Speciality Chemicals vs. Fubon Taiwan Technology
Performance |
| Timeline |
| Taiwan Speciality |
| Fubon Taiwan Technology |
Taiwan Speciality and Fubon Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Speciality and Fubon Taiwan
The main advantage of trading using opposite Taiwan Speciality and Fubon Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Speciality position performs unexpectedly, Fubon 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 Fubon Taiwan will offset losses from the drop in Fubon Taiwan's long position.| Taiwan Speciality vs. Taiwan Semiconductor Manufacturing | Taiwan Speciality vs. Hon Hai Precision | Taiwan Speciality vs. MediaTek | Taiwan Speciality vs. Chunghwa Telecom Co |
| Fubon Taiwan vs. Taiwan Taomee Co | Fubon Taiwan vs. AP Memory Technology | Fubon Taiwan vs. RichWave Technology Corp | Fubon Taiwan vs. Fitipower Integrated Technology |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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