Correlation Between Taiwan Fu and Taiwan Paiho
Can any of the company-specific risk be diversified away by investing in both Taiwan Fu and Taiwan Paiho 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 Taiwan Paiho 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 Taiwan Paiho, you can compare the effects of market volatilities on Taiwan Fu and Taiwan Paiho 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 Taiwan Paiho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Fu and Taiwan Paiho.
Diversification Opportunities for Taiwan Fu and Taiwan Paiho
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Taiwan and Taiwan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Fu Hsing and Taiwan Paiho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Paiho 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 Taiwan Paiho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Paiho has no effect on the direction of Taiwan Fu i.e., Taiwan Fu and Taiwan Paiho go up and down completely randomly.
Pair Corralation between Taiwan Fu and Taiwan Paiho
Assuming the 90 days trading horizon Taiwan Fu Hsing is expected to generate 0.59 times more return on investment than Taiwan Paiho. However, Taiwan Fu Hsing is 1.69 times less risky than Taiwan Paiho. It trades about 0.02 of its potential returns per unit of risk. Taiwan Paiho is currently generating about -0.33 per unit of risk. If you would invest 5,200 in Taiwan Fu Hsing on November 3, 2024 and sell it today you would earn a total of 10.00 from holding Taiwan Fu Hsing or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Fu Hsing vs. Taiwan Paiho
Performance |
| Timeline |
| Taiwan Fu Hsing |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Taiwan Paiho |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Taiwan Fu and Taiwan Paiho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Fu and Taiwan Paiho
The main advantage of trading using opposite Taiwan Fu and Taiwan Paiho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Fu position performs unexpectedly, Taiwan Paiho 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 Paiho will offset losses from the drop in Taiwan Paiho's long position.The idea behind Taiwan Fu Hsing and Taiwan Paiho 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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