Correlation Between Advanced Energy and Taiwan Paiho
Can any of the company-specific risk be diversified away by investing in both Advanced Energy and Taiwan Paiho 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 Advanced Energy and Taiwan Paiho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Energy Solution and Taiwan Paiho, you can compare the effects of market volatilities on Advanced Energy and Taiwan Paiho 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 Advanced Energy with a short position of Taiwan Paiho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Taiwan Paiho.
Diversification Opportunities for Advanced Energy and Taiwan Paiho
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Advanced and Taiwan is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Solution and Taiwan Paiho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Paiho and Advanced Energy 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 Advanced Energy Solution are associated (or correlated) with Taiwan Paiho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Paiho has no effect on the direction of Advanced Energy i.e., Advanced Energy and Taiwan Paiho go up and down completely randomly.
Pair Corralation between Advanced Energy and Taiwan Paiho
Assuming the 90 days trading horizon Advanced Energy Solution is expected to generate 1.24 times more return on investment than Taiwan Paiho. However, Advanced Energy is 1.24 times more volatile than Taiwan Paiho. It trades about 0.06 of its potential returns per unit of risk. Taiwan Paiho is currently generating about 0.06 per unit of risk. If you would invest 63,686 in Advanced Energy Solution on September 1, 2024 and sell it today you would earn a total of 24,314 from holding Advanced Energy Solution or generate 38.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.62% |
| Values | Daily Returns |
Advanced Energy Solution vs. Taiwan Paiho
Performance |
| Timeline |
| Advanced Energy Solution |
| Taiwan Paiho |
Advanced Energy and Taiwan Paiho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advanced Energy and Taiwan Paiho
The main advantage of trading using opposite Advanced Energy and Taiwan Paiho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Energy position performs unexpectedly, Taiwan Paiho 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 Paiho will offset losses from the drop in Taiwan Paiho's long position.| Advanced Energy vs. Walsin Lihwa Corp | Advanced Energy vs. Voltronic Power Technology | Advanced Energy vs. Simplo Technology Co | Advanced Energy vs. Ta Ya Electric |
| Taiwan Paiho vs. Chaintech Technology Corp | Taiwan Paiho vs. AVerMedia Technologies | Taiwan Paiho vs. Avision | Taiwan Paiho vs. Clevo 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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