Correlation Between Ton Yi and ABC Taiwan
Can any of the company-specific risk be diversified away by investing in both Ton Yi and ABC Taiwan 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 Ton Yi and ABC Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ton Yi Industrial and ABC Taiwan Electronics, you can compare the effects of market volatilities on Ton Yi and ABC Taiwan 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 Ton Yi with a short position of ABC Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ton Yi and ABC Taiwan.
Diversification Opportunities for Ton Yi and ABC Taiwan
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ton and ABC is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ton Yi Industrial and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics and Ton Yi 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 Ton Yi Industrial are associated (or correlated) with ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of Ton Yi i.e., Ton Yi and ABC Taiwan go up and down completely randomly.
Pair Corralation between Ton Yi and ABC Taiwan
Assuming the 90 days trading horizon Ton Yi Industrial is expected to under-perform the ABC Taiwan. In addition to that, Ton Yi is 1.29 times more volatile than ABC Taiwan Electronics. It trades about -0.2 of its total potential returns per unit of risk. ABC Taiwan Electronics is currently generating about 0.17 per unit of volatility. If you would invest 2,260 in ABC Taiwan Electronics on September 5, 2024 and sell it today you would earn a total of 110.00 from holding ABC Taiwan Electronics or generate 4.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ton Yi Industrial vs. ABC Taiwan Electronics
Performance |
| Timeline |
| Ton Yi Industrial |
| ABC Taiwan Electronics |
Ton Yi and ABC Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ton Yi and ABC Taiwan
The main advantage of trading using opposite Ton Yi and ABC Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ton Yi position performs unexpectedly, ABC Taiwan 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 ABC Taiwan will offset losses from the drop in ABC Taiwan's long position.The idea behind Ton Yi Industrial and ABC Taiwan Electronics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| ABC Taiwan vs. Wha Yu Industrial | ABC Taiwan vs. Shan Loong Transportation Co | ABC Taiwan vs. Ton Yi Industrial | ABC Taiwan vs. Chinese Maritime Transport |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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