Correlation Between Taiwan Shin and China Steel
Can any of the company-specific risk be diversified away by investing in both Taiwan Shin and China Steel 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 Shin and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Shin Kong and China Steel Chemical, you can compare the effects of market volatilities on Taiwan Shin and China Steel 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 Shin with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Shin and China Steel.
Diversification Opportunities for Taiwan Shin and China Steel
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and China is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Shin Kong and China Steel Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Chemical and Taiwan Shin 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 Shin Kong are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Chemical has no effect on the direction of Taiwan Shin i.e., Taiwan Shin and China Steel go up and down completely randomly.
Pair Corralation between Taiwan Shin and China Steel
Assuming the 90 days trading horizon Taiwan Shin Kong is expected to generate 0.64 times more return on investment than China Steel. However, Taiwan Shin Kong is 1.55 times less risky than China Steel. It trades about -0.09 of its potential returns per unit of risk. China Steel Chemical is currently generating about -0.08 per unit of risk. If you would invest 4,140 in Taiwan Shin Kong on August 24, 2024 and sell it today you would lose (40.00) from holding Taiwan Shin Kong or give up 0.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Shin Kong vs. China Steel Chemical
Performance |
| Timeline |
| Taiwan Shin Kong |
| China Steel Chemical |
Taiwan Shin and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Shin and China Steel
The main advantage of trading using opposite Taiwan Shin and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Shin position performs unexpectedly, China Steel 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 China Steel will offset losses from the drop in China Steel's long position.| Taiwan Shin vs. Taiwan Secom Co | Taiwan Shin vs. Yulon Finance Corp | Taiwan Shin vs. CHC Resources Corp | Taiwan Shin vs. Nak Sealing Technologies |
| China Steel vs. Formosa Chemicals Fibre | China Steel vs. Formosa Plastics Corp | China Steel vs. Cheng Shin Rubber | China Steel vs. President Chain Store |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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