Correlation Between Taiwan Secom and Chung Hsin
Can any of the company-specific risk be diversified away by investing in both Taiwan Secom and Chung Hsin 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 Secom and Chung Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Secom Co and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Taiwan Secom and Chung Hsin 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 Secom with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Secom and Chung Hsin.
Diversification Opportunities for Taiwan Secom and Chung Hsin
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Taiwan and Chung is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Secom Co and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Taiwan Secom 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 Secom Co are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Taiwan Secom i.e., Taiwan Secom and Chung Hsin go up and down completely randomly.
Pair Corralation between Taiwan Secom and Chung Hsin
Assuming the 90 days trading horizon Taiwan Secom is expected to generate 1.6 times less return on investment than Chung Hsin. But when comparing it to its historical volatility, Taiwan Secom Co is 2.23 times less risky than Chung Hsin. It trades about 0.05 of its potential returns per unit of risk. Chung Hsin Electric Machinery is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 13,050 in Chung Hsin Electric Machinery on August 28, 2024 and sell it today you would earn a total of 3,500 from holding Chung Hsin Electric Machinery or generate 26.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Secom Co vs. Chung Hsin Electric Machinery
Performance |
| Timeline |
| Taiwan Secom |
| Chung Hsin Electric |
Taiwan Secom and Chung Hsin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Secom and Chung Hsin
The main advantage of trading using opposite Taiwan Secom and Chung Hsin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Secom position performs unexpectedly, Chung Hsin 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 Chung Hsin will offset losses from the drop in Chung Hsin's long position.| Taiwan Secom vs. Taiwan Shin Kong | Taiwan Secom vs. President Chain Store | Taiwan Secom vs. Yulon Finance Corp | Taiwan Secom vs. Giant Manufacturing Co |
| Chung Hsin vs. TECO Electric Machinery | Chung Hsin vs. Fortune Electric Co | Chung Hsin vs. Taiwan Cement Corp | Chung Hsin vs. Walsin Lihwa 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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