Correlation Between Taiwan Cooperative and Pontex Polyblend
Can any of the company-specific risk be diversified away by investing in both Taiwan Cooperative and Pontex Polyblend 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 Cooperative and Pontex Polyblend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Cooperative Financial and Pontex Polyblend CoLtd, you can compare the effects of market volatilities on Taiwan Cooperative and Pontex Polyblend 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 Cooperative with a short position of Pontex Polyblend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cooperative and Pontex Polyblend.
Diversification Opportunities for Taiwan Cooperative and Pontex Polyblend
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and Pontex is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cooperative Financial and Pontex Polyblend CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pontex Polyblend CoLtd and Taiwan Cooperative 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 Cooperative Financial are associated (or correlated) with Pontex Polyblend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pontex Polyblend CoLtd has no effect on the direction of Taiwan Cooperative i.e., Taiwan Cooperative and Pontex Polyblend go up and down completely randomly.
Pair Corralation between Taiwan Cooperative and Pontex Polyblend
Assuming the 90 days trading horizon Taiwan Cooperative Financial is expected to under-perform the Pontex Polyblend. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Cooperative Financial is 2.97 times less risky than Pontex Polyblend. The stock trades about -0.02 of its potential returns per unit of risk. The Pontex Polyblend CoLtd is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,405 in Pontex Polyblend CoLtd on September 1, 2024 and sell it today you would earn a total of 795.00 from holding Pontex Polyblend CoLtd or generate 56.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Cooperative Financial vs. Pontex Polyblend CoLtd
Performance |
| Timeline |
| Taiwan Cooperative |
| Pontex Polyblend CoLtd |
Taiwan Cooperative and Pontex Polyblend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cooperative and Pontex Polyblend
The main advantage of trading using opposite Taiwan Cooperative and Pontex Polyblend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cooperative position performs unexpectedly, Pontex Polyblend 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 Pontex Polyblend will offset losses from the drop in Pontex Polyblend's long position.| Taiwan Cooperative vs. Central Reinsurance Corp | Taiwan Cooperative vs. Huaku Development Co | Taiwan Cooperative vs. Fubon Financial Holding |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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