Correlation Between Giant Manufacturing and Taiwan Secom
Can any of the company-specific risk be diversified away by investing in both Giant Manufacturing and Taiwan Secom 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 Secom 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 Secom Co, you can compare the effects of market volatilities on Giant Manufacturing and Taiwan Secom 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 Secom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Giant Manufacturing and Taiwan Secom.
Diversification Opportunities for Giant Manufacturing and Taiwan Secom
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Giant and Taiwan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and Taiwan Secom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Secom 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 Secom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Secom has no effect on the direction of Giant Manufacturing i.e., Giant Manufacturing and Taiwan Secom go up and down completely randomly.
Pair Corralation between Giant Manufacturing and Taiwan Secom
Assuming the 90 days trading horizon Giant Manufacturing Co is expected to generate 2.27 times more return on investment than Taiwan Secom. However, Giant Manufacturing is 2.27 times more volatile than Taiwan Secom Co. It trades about 0.18 of its potential returns per unit of risk. Taiwan Secom Co is currently generating about -0.05 per unit of risk. If you would invest 13,900 in Giant Manufacturing Co on November 4, 2024 and sell it today you would earn a total of 750.00 from holding Giant Manufacturing Co or generate 5.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Giant Manufacturing Co vs. Taiwan Secom Co
Performance |
| Timeline |
| Giant Manufacturing |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Taiwan Secom |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Giant Manufacturing and Taiwan Secom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Giant Manufacturing and Taiwan Secom
The main advantage of trading using opposite Giant Manufacturing and Taiwan Secom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Giant Manufacturing position performs unexpectedly, Taiwan Secom 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 Secom will offset losses from the drop in Taiwan Secom's long position.The idea behind Giant Manufacturing Co and Taiwan Secom Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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