Correlation Between Great Taipei and Innolux Corp
Can any of the company-specific risk be diversified away by investing in both Great Taipei and Innolux Corp 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 Taipei and Innolux Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Taipei Gas and Innolux Corp, you can compare the effects of market volatilities on Great Taipei and Innolux Corp 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 Taipei with a short position of Innolux Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Taipei and Innolux Corp.
Diversification Opportunities for Great Taipei and Innolux Corp
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Great and Innolux is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Great Taipei Gas and Innolux Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innolux Corp and Great Taipei 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 Taipei Gas are associated (or correlated) with Innolux Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innolux Corp has no effect on the direction of Great Taipei i.e., Great Taipei and Innolux Corp go up and down completely randomly.
Pair Corralation between Great Taipei and Innolux Corp
Assuming the 90 days trading horizon Great Taipei Gas is expected to under-perform the Innolux Corp. But the stock apears to be less risky and, when comparing its historical volatility, Great Taipei Gas is 6.59 times less risky than Innolux Corp. The stock trades about -0.09 of its potential returns per unit of risk. The Innolux Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,270 in Innolux Corp on September 14, 2024 and sell it today you would earn a total of 265.00 from holding Innolux Corp or generate 20.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Taipei Gas vs. Innolux Corp
Performance |
| Timeline |
| Great Taipei Gas |
| Innolux Corp |
Great Taipei and Innolux Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Taipei and Innolux Corp
The main advantage of trading using opposite Great Taipei and Innolux Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Taipei position performs unexpectedly, Innolux Corp 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 Innolux Corp will offset losses from the drop in Innolux Corp's long position.| Great Taipei vs. Taiwan Secom Co | Great Taipei vs. Taiwan Shin Kong | Great Taipei vs. Taiwan Cogeneration Corp | Great Taipei vs. Ruentex Development Co |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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