Correlation Between Taiwan Cooperative and Taiwan Shin
Can any of the company-specific risk be diversified away by investing in both Taiwan Cooperative and Taiwan Shin 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 Taiwan Shin 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 Taiwan Shin Kong, you can compare the effects of market volatilities on Taiwan Cooperative and Taiwan Shin 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 Taiwan Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cooperative and Taiwan Shin.
Diversification Opportunities for Taiwan Cooperative and Taiwan Shin
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Taiwan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cooperative Financial and Taiwan Shin Kong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Shin Kong 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 Taiwan Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Shin Kong has no effect on the direction of Taiwan Cooperative i.e., Taiwan Cooperative and Taiwan Shin go up and down completely randomly.
Pair Corralation between Taiwan Cooperative and Taiwan Shin
Assuming the 90 days trading horizon Taiwan Cooperative Financial is expected to generate 1.91 times more return on investment than Taiwan Shin. However, Taiwan Cooperative is 1.91 times more volatile than Taiwan Shin Kong. It trades about 0.04 of its potential returns per unit of risk. Taiwan Shin Kong is currently generating about 0.02 per unit of risk. If you would invest 2,430 in Taiwan Cooperative Financial on November 4, 2024 and sell it today you would earn a total of 10.00 from holding Taiwan Cooperative Financial or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Cooperative Financial vs. Taiwan Shin Kong
Performance |
| Timeline |
| Taiwan Cooperative |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Taiwan Shin Kong |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Taiwan Cooperative and Taiwan Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cooperative and Taiwan Shin
The main advantage of trading using opposite Taiwan Cooperative and Taiwan Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cooperative position performs unexpectedly, Taiwan Shin 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 Shin will offset losses from the drop in Taiwan Shin's long position.The idea behind Taiwan Cooperative Financial and Taiwan Shin Kong 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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