Correlation Between Taiwan Cogeneration and Great Taipei
Can any of the company-specific risk be diversified away by investing in both Taiwan Cogeneration and Great Taipei 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 Great Taipei 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 Great Taipei Gas, you can compare the effects of market volatilities on Taiwan Cogeneration and Great Taipei 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 Great Taipei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cogeneration and Great Taipei.
Diversification Opportunities for Taiwan Cogeneration and Great Taipei
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Great is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cogeneration Corp and Great Taipei Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Taipei Gas 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 Great Taipei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Taipei Gas has no effect on the direction of Taiwan Cogeneration i.e., Taiwan Cogeneration and Great Taipei go up and down completely randomly.
Pair Corralation between Taiwan Cogeneration and Great Taipei
Assuming the 90 days trading horizon Taiwan Cogeneration Corp is expected to generate 4.0 times more return on investment than Great Taipei. However, Taiwan Cogeneration is 4.0 times more volatile than Great Taipei Gas. It trades about 0.06 of its potential returns per unit of risk. Great Taipei Gas is currently generating about 0.13 per unit of risk. If you would invest 4,330 in Taiwan Cogeneration Corp on August 28, 2024 and sell it today you would earn a total of 50.00 from holding Taiwan Cogeneration Corp or generate 1.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Cogeneration Corp vs. Great Taipei Gas
Performance |
| Timeline |
| Taiwan Cogeneration Corp |
| Great Taipei Gas |
Taiwan Cogeneration and Great Taipei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cogeneration and Great Taipei
The main advantage of trading using opposite Taiwan Cogeneration and Great Taipei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cogeneration position performs unexpectedly, Great Taipei 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 Great Taipei will offset losses from the drop in Great Taipei's long position.| Taiwan Cogeneration vs. Taiwan Secom Co | Taiwan Cogeneration vs. Taiwan Shin Kong | Taiwan Cogeneration vs. Leatec Fine Ceramics | Taiwan Cogeneration vs. Information Technology Total |
| Great Taipei vs. Taiwan Secom Co | Great Taipei vs. Taiwan Shin Kong | Great Taipei vs. Leatec Fine Ceramics | Great Taipei vs. Information Technology Total |
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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