Correlation Between Taiwan Shin and Bank of Kaohsiung
Can any of the company-specific risk be diversified away by investing in both Taiwan Shin and Bank of Kaohsiung 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 Bank of Kaohsiung 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 Bank of Kaohsiung, you can compare the effects of market volatilities on Taiwan Shin and Bank of Kaohsiung 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 Bank of Kaohsiung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Shin and Bank of Kaohsiung.
Diversification Opportunities for Taiwan Shin and Bank of Kaohsiung
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Bank is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Shin Kong and Bank of Kaohsiung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Kaohsiung 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 Bank of Kaohsiung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Kaohsiung has no effect on the direction of Taiwan Shin i.e., Taiwan Shin and Bank of Kaohsiung go up and down completely randomly.
Pair Corralation between Taiwan Shin and Bank of Kaohsiung
Assuming the 90 days trading horizon Taiwan Shin Kong is expected to generate 0.76 times more return on investment than Bank of Kaohsiung. However, Taiwan Shin Kong is 1.32 times less risky than Bank of Kaohsiung. It trades about -0.09 of its potential returns per unit of risk. Bank of Kaohsiung is currently generating about -0.09 per unit of risk. If you would invest 4,180 in Taiwan Shin Kong on August 29, 2024 and sell it today you would lose (65.00) from holding Taiwan Shin Kong or give up 1.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Shin Kong vs. Bank of Kaohsiung
Performance |
| Timeline |
| Taiwan Shin Kong |
| Bank of Kaohsiung |
Taiwan Shin and Bank of Kaohsiung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Shin and Bank of Kaohsiung
The main advantage of trading using opposite Taiwan Shin and Bank of Kaohsiung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Shin position performs unexpectedly, Bank of Kaohsiung 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 Bank of Kaohsiung will offset losses from the drop in Bank of Kaohsiung's long position.| Taiwan Shin vs. Yulon Motor Co | Taiwan Shin vs. Far Eastern Department | Taiwan Shin vs. China Steel Corp | Taiwan Shin vs. Chang Hwa Commercial |
| Bank of Kaohsiung vs. Taiwan Secom Co | Bank of Kaohsiung vs. TTET Union Corp | Bank of Kaohsiung vs. China Steel Chemical | Bank of Kaohsiung vs. Taiwan Shin Kong |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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