Correlation Between Tai Tung and Arima Communications
Can any of the company-specific risk be diversified away by investing in both Tai Tung and Arima Communications 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 Tai Tung and Arima Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tai Tung Communication and Arima Communications Corp, you can compare the effects of market volatilities on Tai Tung and Arima Communications 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 Tai Tung with a short position of Arima Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tai Tung and Arima Communications.
Diversification Opportunities for Tai Tung and Arima Communications
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tai and Arima is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and Arima Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arima Communications Corp and Tai Tung 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 Tai Tung Communication are associated (or correlated) with Arima Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arima Communications Corp has no effect on the direction of Tai Tung i.e., Tai Tung and Arima Communications go up and down completely randomly.
Pair Corralation between Tai Tung and Arima Communications
Assuming the 90 days trading horizon Tai Tung is expected to generate 17.66 times less return on investment than Arima Communications. But when comparing it to its historical volatility, Tai Tung Communication is 10.63 times less risky than Arima Communications. It trades about 0.06 of its potential returns per unit of risk. Arima Communications Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 372.00 in Arima Communications Corp on September 3, 2024 and sell it today you would earn a total of 2,058 from holding Arima Communications Corp or generate 553.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tai Tung Communication vs. Arima Communications Corp
Performance |
| Timeline |
| Tai Tung Communication |
| Arima Communications Corp |
Tai Tung and Arima Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tai Tung and Arima Communications
The main advantage of trading using opposite Tai Tung and Arima Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tai Tung position performs unexpectedly, Arima Communications 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 Arima Communications will offset losses from the drop in Arima Communications' long position.| Tai Tung vs. Taiwan Semiconductor Manufacturing | Tai Tung vs. Yang Ming Marine | Tai Tung vs. ASE Industrial Holding | Tai Tung vs. AU Optronics |
| Arima Communications vs. Taiwan Semiconductor Manufacturing | Arima Communications vs. Yang Ming Marine | Arima Communications vs. ASE Industrial Holding | Arima Communications vs. AU Optronics |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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