Correlation Between Great Taipei and Taiwan Shin
Can any of the company-specific risk be diversified away by investing in both Great Taipei and Taiwan Shin 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 Taiwan Shin 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 Taiwan Shin Kong, you can compare the effects of market volatilities on Great Taipei and Taiwan Shin 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 Taiwan Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Taipei and Taiwan Shin.
Diversification Opportunities for Great Taipei and Taiwan Shin
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Great and Taiwan is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Great Taipei Gas and Taiwan Shin Kong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Shin Kong 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 Taiwan Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Shin Kong has no effect on the direction of Great Taipei i.e., Great Taipei and Taiwan Shin go up and down completely randomly.
Pair Corralation between Great Taipei and Taiwan Shin
Assuming the 90 days trading horizon Great Taipei Gas is expected to generate 0.5 times more return on investment than Taiwan Shin. However, Great Taipei Gas is 1.99 times less risky than Taiwan Shin. It trades about 0.13 of its potential returns per unit of risk. Taiwan Shin Kong is currently generating about -0.06 per unit of risk. If you would invest 3,015 in Great Taipei Gas on August 28, 2024 and sell it today you would earn a total of 20.00 from holding Great Taipei Gas or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Taipei Gas vs. Taiwan Shin Kong
Performance |
| Timeline |
| Great Taipei Gas |
| Taiwan Shin Kong |
Great Taipei and Taiwan Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Taipei and Taiwan Shin
The main advantage of trading using opposite Great Taipei and Taiwan Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Taipei position performs unexpectedly, Taiwan Shin 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 Shin will offset losses from the drop in Taiwan Shin's long position.| Great Taipei vs. Taiwan Secom Co | Great Taipei vs. Taiwan Shin Kong | Great Taipei vs. Leatec Fine Ceramics | Great Taipei vs. Information Technology Total |
| Taiwan Shin vs. Sunny Friend Environmental | Taiwan Shin vs. TTET Union Corp | Taiwan Shin vs. ECOVE Environment Corp | Taiwan Shin vs. Yulon Finance Corp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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