Correlation Between Taiwan Shin and Hua Nan
Can any of the company-specific risk be diversified away by investing in both Taiwan Shin and Hua Nan 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 Hua Nan 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 Hua Nan Financial, you can compare the effects of market volatilities on Taiwan Shin and Hua Nan 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 Hua Nan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Shin and Hua Nan.
Diversification Opportunities for Taiwan Shin and Hua Nan
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Hua is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Shin Kong and Hua Nan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Nan Financial 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 Hua Nan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Nan Financial has no effect on the direction of Taiwan Shin i.e., Taiwan Shin and Hua Nan go up and down completely randomly.
Pair Corralation between Taiwan Shin and Hua Nan
Assuming the 90 days trading horizon Taiwan Shin is expected to generate 1.88 times less return on investment than Hua Nan. But when comparing it to its historical volatility, Taiwan Shin Kong is 1.88 times less risky than Hua Nan. It trades about 0.04 of its potential returns per unit of risk. Hua Nan Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,203 in Hua Nan Financial on August 30, 2024 and sell it today you would earn a total of 417.00 from holding Hua Nan Financial or generate 18.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Shin Kong vs. Hua Nan Financial
Performance |
| Timeline |
| Taiwan Shin Kong |
| Hua Nan Financial |
Taiwan Shin and Hua Nan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Shin and Hua Nan
The main advantage of trading using opposite Taiwan Shin and Hua Nan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Shin position performs unexpectedly, Hua Nan 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 Hua Nan will offset losses from the drop in Hua Nan'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 |
| Hua Nan vs. Taiwan Secom Co | Hua Nan vs. TTET Union Corp | Hua Nan vs. China Steel Chemical | Hua Nan 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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