Correlation Between Taiwan Taomee and Mechema Chemicals
Can any of the company-specific risk be diversified away by investing in both Taiwan Taomee and Mechema Chemicals 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 Taomee and Mechema Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Taomee Co and Mechema Chemicals Int, you can compare the effects of market volatilities on Taiwan Taomee and Mechema Chemicals 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 Taomee with a short position of Mechema Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Taomee and Mechema Chemicals.
Diversification Opportunities for Taiwan Taomee and Mechema Chemicals
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Taiwan and Mechema is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Taomee Co and Mechema Chemicals Int in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mechema Chemicals Int and Taiwan Taomee 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 Taomee Co are associated (or correlated) with Mechema Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mechema Chemicals Int has no effect on the direction of Taiwan Taomee i.e., Taiwan Taomee and Mechema Chemicals go up and down completely randomly.
Pair Corralation between Taiwan Taomee and Mechema Chemicals
Assuming the 90 days trading horizon Taiwan Taomee Co is expected to generate 0.77 times more return on investment than Mechema Chemicals. However, Taiwan Taomee Co is 1.3 times less risky than Mechema Chemicals. It trades about 0.04 of its potential returns per unit of risk. Mechema Chemicals Int is currently generating about 0.02 per unit of risk. If you would invest 1,015 in Taiwan Taomee Co on August 29, 2024 and sell it today you would earn a total of 10.00 from holding Taiwan Taomee Co or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Taomee Co vs. Mechema Chemicals Int
Performance |
| Timeline |
| Taiwan Taomee |
| Mechema Chemicals Int |
Taiwan Taomee and Mechema Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Taomee and Mechema Chemicals
The main advantage of trading using opposite Taiwan Taomee and Mechema Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Taomee position performs unexpectedly, Mechema Chemicals 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 Mechema Chemicals will offset losses from the drop in Mechema Chemicals' long position.The idea behind Taiwan Taomee Co and Mechema Chemicals Int 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.| Mechema Chemicals vs. Delta Electronics | Mechema Chemicals vs. China Steel Chemical | Mechema Chemicals vs. Hota Industrial Mfg | Mechema Chemicals vs. Ruentex Development Co |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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