Correlation Between Taiwan Fu and Huaku Development
Can any of the company-specific risk be diversified away by investing in both Taiwan Fu and Huaku 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 Fu and Huaku Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Fu Hsing and Huaku Development Co, you can compare the effects of market volatilities on Taiwan Fu and Huaku 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 Fu with a short position of Huaku Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Fu and Huaku Development.
Diversification Opportunities for Taiwan Fu and Huaku Development
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Taiwan and Huaku is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Fu Hsing and Huaku Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaku Development and Taiwan Fu 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 Fu Hsing are associated (or correlated) with Huaku Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaku Development has no effect on the direction of Taiwan Fu i.e., Taiwan Fu and Huaku Development go up and down completely randomly.
Pair Corralation between Taiwan Fu and Huaku Development
Assuming the 90 days trading horizon Taiwan Fu is expected to generate 8.48 times less return on investment than Huaku Development. In addition to that, Taiwan Fu is 1.16 times more volatile than Huaku Development Co. It trades about 0.01 of its total potential returns per unit of risk. Huaku Development Co is currently generating about 0.13 per unit of volatility. If you would invest 11,850 in Huaku Development Co on August 27, 2024 and sell it today you would earn a total of 650.00 from holding Huaku Development Co or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Fu Hsing vs. Huaku Development Co
Performance |
| Timeline |
| Taiwan Fu Hsing |
| Huaku Development |
Taiwan Fu and Huaku Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Fu and Huaku Development
The main advantage of trading using opposite Taiwan Fu and Huaku Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Fu position performs unexpectedly, Huaku 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 Huaku Development will offset losses from the drop in Huaku Development's long position.| Taiwan Fu vs. Taiwan Shin Kong | Taiwan Fu vs. Taiwan Secom Co | Taiwan Fu vs. Pou Chen Corp | Taiwan Fu vs. Taiwan Hon Chuan |
| Huaku Development vs. Chong Hong Construction | Huaku Development vs. Highwealth Construction Corp | Huaku Development vs. Fubon Financial Holding | Huaku Development vs. CTBC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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