Correlation Between Taiwan Allied and Sheng Yu
Can any of the company-specific risk be diversified away by investing in both Taiwan Allied and Sheng Yu 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 Allied and Sheng Yu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Allied Container and Sheng Yu Steel, you can compare the effects of market volatilities on Taiwan Allied and Sheng Yu 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 Allied with a short position of Sheng Yu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Allied and Sheng Yu.
Diversification Opportunities for Taiwan Allied and Sheng Yu
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Sheng is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Allied Container and Sheng Yu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sheng Yu Steel and Taiwan Allied 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 Allied Container are associated (or correlated) with Sheng Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sheng Yu Steel has no effect on the direction of Taiwan Allied i.e., Taiwan Allied and Sheng Yu go up and down completely randomly.
Pair Corralation between Taiwan Allied and Sheng Yu
Assuming the 90 days trading horizon Taiwan Allied Container is expected to under-perform the Sheng Yu. In addition to that, Taiwan Allied is 2.82 times more volatile than Sheng Yu Steel. It trades about -0.01 of its total potential returns per unit of risk. Sheng Yu Steel is currently generating about 0.25 per unit of volatility. If you would invest 2,350 in Sheng Yu Steel on November 4, 2024 and sell it today you would earn a total of 70.00 from holding Sheng Yu Steel or generate 2.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Allied Container vs. Sheng Yu Steel
Performance |
| Timeline |
| Taiwan Allied Container |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Sheng Yu Steel |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Taiwan Allied and Sheng Yu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Allied and Sheng Yu
The main advantage of trading using opposite Taiwan Allied and Sheng Yu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Allied position performs unexpectedly, Sheng Yu 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 Sheng Yu will offset losses from the drop in Sheng Yu's long position.The idea behind Taiwan Allied Container and Sheng Yu Steel 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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