Correlation Between Taiwan Shin and Union Bank
Can any of the company-specific risk be diversified away by investing in both Taiwan Shin and Union Bank 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 Union Bank 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 Union Bank of, you can compare the effects of market volatilities on Taiwan Shin and Union Bank 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 Union Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Shin and Union Bank.
Diversification Opportunities for Taiwan Shin and Union Bank
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Union is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Shin Kong and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank 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 Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of Taiwan Shin i.e., Taiwan Shin and Union Bank go up and down completely randomly.
Pair Corralation between Taiwan Shin and Union Bank
Assuming the 90 days trading horizon Taiwan Shin Kong is expected to under-perform the Union Bank. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Shin Kong is 1.72 times less risky than Union Bank. The stock trades about -0.09 of its potential returns per unit of risk. The Union Bank of is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,550 in Union Bank of on August 29, 2024 and sell it today you would earn a total of 10.00 from holding Union Bank of or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Shin Kong vs. Union Bank of
Performance |
| Timeline |
| Taiwan Shin Kong |
| Union Bank |
Taiwan Shin and Union Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Shin and Union Bank
The main advantage of trading using opposite Taiwan Shin and Union Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Shin position performs unexpectedly, Union Bank 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 Union Bank will offset losses from the drop in Union Bank'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 |
| Union Bank vs. Taiwan Secom Co | Union Bank vs. TTET Union Corp | Union Bank vs. China Steel Chemical | Union Bank 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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