Correlation Between Taiwan Fu and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Taiwan Fu and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Taiwan Fu and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Fu and Dow Jones.
Diversification Opportunities for Taiwan Fu and Dow Jones
Average diversification
The 3 months correlation between Taiwan and Dow is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Fu Hsing and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Taiwan Fu i.e., Taiwan Fu and Dow Jones go up and down completely randomly.
Pair Corralation between Taiwan Fu and Dow Jones
Assuming the 90 days trading horizon Taiwan Fu Hsing is expected to generate 1.9 times more return on investment than Dow Jones. However, Taiwan Fu is 1.9 times more volatile than Dow Jones Industrial. It trades about 0.05 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 4,170 in Taiwan Fu Hsing on August 24, 2024 and sell it today you would earn a total of 1,210 from holding Taiwan Fu Hsing or generate 29.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.77% |
| Values | Daily Returns |
Taiwan Fu Hsing vs. Dow Jones Industrial
Performance |
| Timeline |
Taiwan Fu and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Fu Hsing
Pair trading matchups for Taiwan Fu
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Taiwan Fu and Dow Jones
The main advantage of trading using opposite Taiwan Fu and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Fu position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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