Correlation Between Taiwan Speciality and Taishin Financial
Can any of the company-specific risk be diversified away by investing in both Taiwan Speciality and Taishin Financial 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 Taishin Financial 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 Taishin Financial Holding, you can compare the effects of market volatilities on Taiwan Speciality and Taishin Financial 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 Taishin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Speciality and Taishin Financial.
Diversification Opportunities for Taiwan Speciality and Taishin Financial
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Taiwan and Taishin is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Speciality Chemicals and Taishin Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taishin Financial Holding 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 Taishin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taishin Financial Holding has no effect on the direction of Taiwan Speciality i.e., Taiwan Speciality and Taishin Financial go up and down completely randomly.
Pair Corralation between Taiwan Speciality and Taishin Financial
Assuming the 90 days trading horizon Taiwan Speciality Chemicals is expected to generate 18.43 times more return on investment than Taishin Financial. However, Taiwan Speciality is 18.43 times more volatile than Taishin Financial Holding. It trades about 0.7 of its potential returns per unit of risk. Taishin Financial Holding is currently generating about -0.06 per unit of risk. If you would invest 17,750 in Taiwan Speciality Chemicals on November 4, 2024 and sell it today you would earn a total of 8,650 from holding Taiwan Speciality Chemicals or generate 48.73% 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. Taishin Financial Holding
Performance |
| Timeline |
| Taiwan Speciality |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Taishin Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Taiwan Speciality and Taishin Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Speciality and Taishin Financial
The main advantage of trading using opposite Taiwan Speciality and Taishin Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Speciality position performs unexpectedly, Taishin Financial 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 Taishin Financial will offset losses from the drop in Taishin Financial's long position.The idea behind Taiwan Speciality Chemicals and Taishin Financial Holding 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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