Correlation Between U Media and Taiwan Chinsan
Can any of the company-specific risk be diversified away by investing in both U Media and Taiwan Chinsan 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 U Media and Taiwan Chinsan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between U Media Communications and Taiwan Chinsan Electronic, you can compare the effects of market volatilities on U Media and Taiwan Chinsan 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 U Media with a short position of Taiwan Chinsan. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Media and Taiwan Chinsan.
Diversification Opportunities for U Media and Taiwan Chinsan
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 6470 and Taiwan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and Taiwan Chinsan Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Chinsan Electronic and U Media 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 U Media Communications are associated (or correlated) with Taiwan Chinsan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Chinsan Electronic has no effect on the direction of U Media i.e., U Media and Taiwan Chinsan go up and down completely randomly.
Pair Corralation between U Media and Taiwan Chinsan
Assuming the 90 days trading horizon U Media is expected to generate 2.61 times less return on investment than Taiwan Chinsan. But when comparing it to its historical volatility, U Media Communications is 1.5 times less risky than Taiwan Chinsan. It trades about 0.14 of its potential returns per unit of risk. Taiwan Chinsan Electronic is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,455 in Taiwan Chinsan Electronic on September 13, 2024 and sell it today you would earn a total of 1,115 from holding Taiwan Chinsan Electronic or generate 32.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Media Communications vs. Taiwan Chinsan Electronic
Performance |
| Timeline |
| U Media Communications |
| Taiwan Chinsan Electronic |
U Media and Taiwan Chinsan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Media and Taiwan Chinsan
The main advantage of trading using opposite U Media and Taiwan Chinsan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Media position performs unexpectedly, Taiwan Chinsan 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 Chinsan will offset losses from the drop in Taiwan Chinsan's long position.| U Media vs. Hunya Foods Co | U Media vs. Cleanaway Co | U Media vs. Fu Burg Industrial | U Media vs. Coxon Precise Industrial |
| Taiwan Chinsan vs. ANJI Technology Co | Taiwan Chinsan vs. Emerging Display Technologies | Taiwan Chinsan vs. U Tech Media Corp | Taiwan Chinsan 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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