Correlation Between Taiwan Cogeneration and Shan Loong
Can any of the company-specific risk be diversified away by investing in both Taiwan Cogeneration and Shan Loong 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 Cogeneration and Shan Loong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Cogeneration Corp and Shan Loong Transportation Co, you can compare the effects of market volatilities on Taiwan Cogeneration and Shan Loong 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 Cogeneration with a short position of Shan Loong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cogeneration and Shan Loong.
Diversification Opportunities for Taiwan Cogeneration and Shan Loong
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Shan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cogeneration Corp and Shan Loong Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Loong Transport and Taiwan Cogeneration 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 Cogeneration Corp are associated (or correlated) with Shan Loong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Loong Transport has no effect on the direction of Taiwan Cogeneration i.e., Taiwan Cogeneration and Shan Loong go up and down completely randomly.
Pair Corralation between Taiwan Cogeneration and Shan Loong
Assuming the 90 days trading horizon Taiwan Cogeneration Corp is expected to under-perform the Shan Loong. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Cogeneration Corp is 1.69 times less risky than Shan Loong. The stock trades about -0.01 of its potential returns per unit of risk. The Shan Loong Transportation Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,735 in Shan Loong Transportation Co on November 29, 2024 and sell it today you would earn a total of 35.00 from holding Shan Loong Transportation Co or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Cogeneration Corp vs. Shan Loong Transportation Co
Performance |
| Timeline |
| Taiwan Cogeneration Corp |
| Shan Loong Transport |
Taiwan Cogeneration and Shan Loong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cogeneration and Shan Loong
The main advantage of trading using opposite Taiwan Cogeneration and Shan Loong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cogeneration position performs unexpectedly, Shan Loong 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 Shan Loong will offset losses from the drop in Shan Loong's long position.| Taiwan Cogeneration vs. Great Taipei Gas | Taiwan Cogeneration vs. Taiwan Cement Corp | Taiwan Cogeneration vs. Mega Financial Holding | Taiwan Cogeneration vs. First Financial Holding |
| Shan Loong vs. Kerry TJ Logistics | Shan Loong vs. China Container Terminal | Shan Loong vs. Eastern Media International | Shan Loong vs. Taiwan Navigation 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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