Correlation Between Giant Manufacturing and Taiwan Cement
Can any of the company-specific risk be diversified away by investing in both Giant Manufacturing and Taiwan Cement 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 Giant Manufacturing and Taiwan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Giant Manufacturing Co and Taiwan Cement Corp, you can compare the effects of market volatilities on Giant Manufacturing and Taiwan Cement 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 Giant Manufacturing with a short position of Taiwan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Giant Manufacturing and Taiwan Cement.
Diversification Opportunities for Giant Manufacturing and Taiwan Cement
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Giant and Taiwan is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and Giant Manufacturing 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 Giant Manufacturing Co are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Giant Manufacturing i.e., Giant Manufacturing and Taiwan Cement go up and down completely randomly.
Pair Corralation between Giant Manufacturing and Taiwan Cement
Assuming the 90 days trading horizon Giant Manufacturing Co is expected to under-perform the Taiwan Cement. In addition to that, Giant Manufacturing is 2.34 times more volatile than Taiwan Cement Corp. It trades about -0.38 of its total potential returns per unit of risk. Taiwan Cement Corp is currently generating about 0.27 per unit of volatility. If you would invest 3,215 in Taiwan Cement Corp on August 28, 2024 and sell it today you would earn a total of 165.00 from holding Taiwan Cement Corp or generate 5.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Giant Manufacturing Co vs. Taiwan Cement Corp
Performance |
| Timeline |
| Giant Manufacturing |
| Taiwan Cement Corp |
Giant Manufacturing and Taiwan Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Giant Manufacturing and Taiwan Cement
The main advantage of trading using opposite Giant Manufacturing and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Giant Manufacturing position performs unexpectedly, Taiwan Cement 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 Cement will offset losses from the drop in Taiwan Cement's long position.| Giant Manufacturing vs. Taiwan Semiconductor Manufacturing | Giant Manufacturing vs. Hon Hai Precision | Giant Manufacturing vs. MediaTek | Giant Manufacturing vs. Chunghwa Telecom Co |
| Taiwan Cement vs. Cheng Shin Rubber | Taiwan Cement vs. China Steel Chemical | Taiwan Cement vs. Yulon Motor Co |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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