Correlation Between Taiwan FamilyMart and Taiwan Cement
Can any of the company-specific risk be diversified away by investing in both Taiwan FamilyMart and Taiwan Cement 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 FamilyMart and Taiwan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan FamilyMart Co and Taiwan Cement Corp, you can compare the effects of market volatilities on Taiwan FamilyMart and Taiwan Cement 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 FamilyMart with a short position of Taiwan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan FamilyMart and Taiwan Cement.
Diversification Opportunities for Taiwan FamilyMart and Taiwan Cement
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Taiwan and Taiwan is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan FamilyMart Co and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and Taiwan FamilyMart 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 FamilyMart Co are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Taiwan FamilyMart i.e., Taiwan FamilyMart and Taiwan Cement go up and down completely randomly.
Pair Corralation between Taiwan FamilyMart and Taiwan Cement
Assuming the 90 days trading horizon Taiwan FamilyMart is expected to generate 8.41 times less return on investment than Taiwan Cement. But when comparing it to its historical volatility, Taiwan FamilyMart Co is 1.34 times less risky than Taiwan Cement. It trades about 0.04 of its potential returns per unit of risk. Taiwan Cement Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,195 in Taiwan Cement Corp on September 1, 2024 and sell it today you would earn a total of 155.00 from holding Taiwan Cement Corp or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan FamilyMart Co vs. Taiwan Cement Corp
Performance |
| Timeline |
| Taiwan FamilyMart |
| Taiwan Cement Corp |
Taiwan FamilyMart and Taiwan Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan FamilyMart and Taiwan Cement
The main advantage of trading using opposite Taiwan FamilyMart and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan FamilyMart position performs unexpectedly, Taiwan Cement 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 Cement will offset losses from the drop in Taiwan Cement's long position.| Taiwan FamilyMart vs. De Licacy Industrial | Taiwan FamilyMart vs. Wisher Industrial Co | Taiwan FamilyMart vs. Tainan Enterprises Co |
| Taiwan Cement vs. Asia Cement Corp | Taiwan Cement vs. Formosa Plastics Corp | Taiwan Cement vs. Nan Ya Plastics | Taiwan Cement vs. China Steel Corp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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