Correlation Between Taiwan Surface and Sitronix Technology

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Can any of the company-specific risk be diversified away by investing in both Taiwan Surface and Sitronix Technology 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 Surface and Sitronix Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Surface Mounting and Sitronix Technology Corp, you can compare the effects of market volatilities on Taiwan Surface and Sitronix Technology 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 Surface with a short position of Sitronix Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Surface and Sitronix Technology.

Diversification Opportunities for Taiwan Surface and Sitronix Technology

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Taiwan and Sitronix is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Surface Mounting and Sitronix Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitronix Technology Corp and Taiwan Surface 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 Surface Mounting are associated (or correlated) with Sitronix Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitronix Technology Corp has no effect on the direction of Taiwan Surface i.e., Taiwan Surface and Sitronix Technology go up and down completely randomly.

Pair Corralation between Taiwan Surface and Sitronix Technology

Assuming the 90 days trading horizon Taiwan Surface is expected to generate 1.89 times less return on investment than Sitronix Technology. But when comparing it to its historical volatility, Taiwan Surface Mounting is 1.13 times less risky than Sitronix Technology. It trades about 0.02 of its potential returns per unit of risk. Sitronix Technology Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  17,650  in Sitronix Technology Corp on September 3, 2024 and sell it today you would earn a total of  3,050  from holding Sitronix Technology Corp or generate 17.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Taiwan Surface Mounting  vs.  Sitronix Technology Corp

 Performance 
       Timeline  
Taiwan Surface Mounting 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Taiwan Surface Mounting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
Sitronix Technology Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sitronix Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Taiwan Surface and Sitronix Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Taiwan Surface and Sitronix Technology

The main advantage of trading using opposite Taiwan Surface and Sitronix Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Surface position performs unexpectedly, Sitronix Technology 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 Sitronix Technology will offset losses from the drop in Sitronix Technology's long position.
The idea behind Taiwan Surface Mounting and Sitronix Technology Corp 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.
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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