Correlation Between Taiwan Steel and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Taiwan Steel and Chung Hwa 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 Hwa 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 Hwa Chemical, you can compare the effects of market volatilities on Taiwan Steel and Chung Hwa 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 Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Steel and Chung Hwa.
Diversification Opportunities for Taiwan Steel and Chung Hwa
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Taiwan and Chung is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Steel Union and Chung Hwa Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Chemical 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 Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Chemical has no effect on the direction of Taiwan Steel i.e., Taiwan Steel and Chung Hwa go up and down completely randomly.
Pair Corralation between Taiwan Steel and Chung Hwa
Assuming the 90 days trading horizon Taiwan Steel Union is expected to under-perform the Chung Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Steel Union is 2.02 times less risky than Chung Hwa. The stock trades about -0.28 of its potential returns per unit of risk. The Chung Hwa Chemical is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 3,710 in Chung Hwa Chemical on September 1, 2024 and sell it today you would lose (285.00) from holding Chung Hwa Chemical or give up 7.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Steel Union vs. Chung Hwa Chemical
Performance |
| Timeline |
| Taiwan Steel Union |
| Chung Hwa Chemical |
Taiwan Steel and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Steel and Chung Hwa
The main advantage of trading using opposite Taiwan Steel and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Steel position performs unexpectedly, Chung Hwa 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 Hwa will offset losses from the drop in Chung Hwa's long position.| Taiwan Steel vs. Cleanaway Co | Taiwan Steel vs. Sunny Friend Environmental | Taiwan Steel vs. Topco Scientific Co | Taiwan Steel vs. Kung Long Batteries |
| Chung Hwa vs. Oriental Union Chemical | Chung Hwa vs. Everlight Chemical Industrial | Chung Hwa vs. Formosan Union Chemical | Chung Hwa vs. Sesoda 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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