Correlation Between Taiwan Secom and China Development
Can any of the company-specific risk be diversified away by investing in both Taiwan Secom and China Development 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 China Development 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 China Development Financial, you can compare the effects of market volatilities on Taiwan Secom and China Development 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 China Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Secom and China Development.
Diversification Opportunities for Taiwan Secom and China Development
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and China is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Secom Co and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development 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 China Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development has no effect on the direction of Taiwan Secom i.e., Taiwan Secom and China Development go up and down completely randomly.
Pair Corralation between Taiwan Secom and China Development
Assuming the 90 days trading horizon Taiwan Secom Co is expected to under-perform the China Development. In addition to that, Taiwan Secom is 1.62 times more volatile than China Development Financial. It trades about -0.2 of its total potential returns per unit of risk. China Development Financial is currently generating about 0.13 per unit of volatility. If you would invest 1,670 in China Development Financial on September 2, 2024 and sell it today you would earn a total of 50.00 from holding China Development Financial or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Secom Co vs. China Development Financial
Performance |
| Timeline |
| Taiwan Secom |
| China Development |
Taiwan Secom and China Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Secom and China Development
The main advantage of trading using opposite Taiwan Secom and China Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Secom position performs unexpectedly, China Development 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 China Development will offset losses from the drop in China Development'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 |
| China Development vs. Cathay Financial Holding | China Development vs. Mega Financial Holding | China Development vs. CTBC Financial Holding | China Development vs. Fubon 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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