Correlation Between Taiwan Steel and Chung Fu
Can any of the company-specific risk be diversified away by investing in both Taiwan Steel and Chung Fu 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 Steel and Chung Fu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Steel Union and Chung Fu Tex International, you can compare the effects of market volatilities on Taiwan Steel and Chung Fu 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 Steel with a short position of Chung Fu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Steel and Chung Fu.
Diversification Opportunities for Taiwan Steel and Chung Fu
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Taiwan and Chung is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Steel Union and Chung Fu Tex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Fu Tex and Taiwan Steel 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 Steel Union are associated (or correlated) with Chung Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Fu Tex has no effect on the direction of Taiwan Steel i.e., Taiwan Steel and Chung Fu go up and down completely randomly.
Pair Corralation between Taiwan Steel and Chung Fu
Assuming the 90 days trading horizon Taiwan Steel is expected to generate 1.77 times less return on investment than Chung Fu. But when comparing it to its historical volatility, Taiwan Steel Union is 2.57 times less risky than Chung Fu. It trades about 0.08 of its potential returns per unit of risk. Chung Fu Tex International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,630 in Chung Fu Tex International on September 12, 2024 and sell it today you would earn a total of 1,470 from holding Chung Fu Tex International or generate 55.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.71% |
| Values | Daily Returns |
Taiwan Steel Union vs. Chung Fu Tex International
Performance |
| Timeline |
| Taiwan Steel Union |
| Chung Fu Tex |
Taiwan Steel and Chung Fu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Steel and Chung Fu
The main advantage of trading using opposite Taiwan Steel and Chung Fu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Steel position performs unexpectedly, Chung Fu 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 Chung Fu will offset losses from the drop in Chung Fu's long position.| Taiwan Steel vs. Cleanaway Co | Taiwan Steel vs. Sunny Friend Environmental | Taiwan Steel vs. Topco Scientific Co | Taiwan Steel vs. Chailease Holding Co |
| Chung Fu vs. Tehmag Foods | Chung Fu vs. China Steel Corp | Chung Fu vs. ECOVE Environment Corp | Chung Fu vs. Taiwan Steel Union |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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