Correlation Between Taiwan Taomee and GlobalWafers
Can any of the company-specific risk be diversified away by investing in both Taiwan Taomee and GlobalWafers 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 GlobalWafers 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 GlobalWafers Co, you can compare the effects of market volatilities on Taiwan Taomee and GlobalWafers 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 GlobalWafers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Taomee and GlobalWafers.
Diversification Opportunities for Taiwan Taomee and GlobalWafers
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Taiwan and GlobalWafers is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Taomee Co and GlobalWafers Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlobalWafers 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 GlobalWafers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlobalWafers has no effect on the direction of Taiwan Taomee i.e., Taiwan Taomee and GlobalWafers go up and down completely randomly.
Pair Corralation between Taiwan Taomee and GlobalWafers
Assuming the 90 days trading horizon Taiwan Taomee Co is expected to generate 1.58 times more return on investment than GlobalWafers. However, Taiwan Taomee is 1.58 times more volatile than GlobalWafers Co. It trades about 0.01 of its potential returns per unit of risk. GlobalWafers Co is currently generating about -0.06 per unit of risk. If you would invest 1,100 in Taiwan Taomee Co on September 2, 2024 and sell it today you would lose (35.00) from holding Taiwan Taomee Co or give up 3.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Taomee Co vs. GlobalWafers Co
Performance |
| Timeline |
| Taiwan Taomee |
| GlobalWafers |
Taiwan Taomee and GlobalWafers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Taomee and GlobalWafers
The main advantage of trading using opposite Taiwan Taomee and GlobalWafers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Taomee position performs unexpectedly, GlobalWafers 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 GlobalWafers will offset losses from the drop in GlobalWafers' long position.| Taiwan Taomee vs. Thermaltake Technology Co | Taiwan Taomee vs. Century Iron And | Taiwan Taomee vs. Sunspring Metal Corp | Taiwan Taomee vs. Air Asia Co |
| GlobalWafers vs. WIN Semiconductors | GlobalWafers vs. Sino American Silicon Products | GlobalWafers vs. Novatek Microelectronics Corp | GlobalWafers vs. Yageo 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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