Correlation Between Great China and Taiwan Weighted
Can any of the company-specific risk be diversified away by investing in both Great China and Taiwan Weighted 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 Great China and Taiwan Weighted into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great China Metal and Taiwan Weighted, you can compare the effects of market volatilities on Great China and Taiwan Weighted 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 Great China with a short position of Taiwan Weighted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and Taiwan Weighted.
Diversification Opportunities for Great China and Taiwan Weighted
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Great and Taiwan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and Taiwan Weighted in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Weighted and Great China 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 Great China Metal are associated (or correlated) with Taiwan Weighted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Weighted has no effect on the direction of Great China i.e., Great China and Taiwan Weighted go up and down completely randomly.
Pair Corralation between Great China and Taiwan Weighted
Assuming the 90 days trading horizon Great China is expected to generate 4.42 times less return on investment than Taiwan Weighted. But when comparing it to its historical volatility, Great China Metal is 2.82 times less risky than Taiwan Weighted. It trades about 0.03 of its potential returns per unit of risk. Taiwan Weighted is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,237,066 in Taiwan Weighted on August 28, 2024 and sell it today you would earn a total of 57,771 from holding Taiwan Weighted or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.16% |
| Values | Daily Returns |
Great China Metal vs. Taiwan Weighted
Performance |
| Timeline |
Great China and Taiwan Weighted Volatility Contrast
Predicted Return Density |
| Returns |
Great China Metal
Pair trading matchups for Great China
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Pair Trading with Great China and Taiwan Weighted
The main advantage of trading using opposite Great China and Taiwan Weighted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great China position performs unexpectedly, Taiwan Weighted 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 Weighted will offset losses from the drop in Taiwan Weighted's long position.| Great China vs. Taiwan Hon Chuan | Great China vs. Taiwan Secom Co | Great China vs. Taiwan Fu Hsing | Great China vs. Taiwan Shin Kong |
| Taiwan Weighted vs. Taichung Commercial Bank | Taiwan Weighted vs. China Times Publishing | Taiwan Weighted vs. First Insurance Co | Taiwan Weighted vs. Mega Financial Holding |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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