Correlation Between Taiwan Shin and Great Taipei
Can any of the company-specific risk be diversified away by investing in both Taiwan Shin and Great Taipei 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 Great Taipei 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 Great Taipei Gas, you can compare the effects of market volatilities on Taiwan Shin and Great Taipei 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 Great Taipei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Shin and Great Taipei.
Diversification Opportunities for Taiwan Shin and Great Taipei
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Taiwan and Great is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Shin Kong and Great Taipei Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Taipei Gas 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 Great Taipei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Taipei Gas has no effect on the direction of Taiwan Shin i.e., Taiwan Shin and Great Taipei go up and down completely randomly.
Pair Corralation between Taiwan Shin and Great Taipei
Assuming the 90 days trading horizon Taiwan Shin Kong is expected to generate 1.89 times more return on investment than Great Taipei. However, Taiwan Shin is 1.89 times more volatile than Great Taipei Gas. It trades about -0.01 of its potential returns per unit of risk. Great Taipei Gas is currently generating about -0.1 per unit of risk. If you would invest 4,140 in Taiwan Shin Kong on August 28, 2024 and sell it today you would lose (15.00) from holding Taiwan Shin Kong or give up 0.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Shin Kong vs. Great Taipei Gas
Performance |
| Timeline |
| Taiwan Shin Kong |
| Great Taipei Gas |
Taiwan Shin and Great Taipei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Shin and Great Taipei
The main advantage of trading using opposite Taiwan Shin and Great Taipei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Shin position performs unexpectedly, Great Taipei 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 Great Taipei will offset losses from the drop in Great Taipei's long position.| Taiwan Shin vs. Sunny Friend Environmental | Taiwan Shin vs. TTET Union Corp | Taiwan Shin vs. ECOVE Environment Corp | Taiwan Shin vs. Yulon Finance Corp |
| Great Taipei vs. Taiwan Secom Co | Great Taipei vs. Taiwan Shin Kong | Great Taipei vs. Leatec Fine Ceramics | Great Taipei vs. Information Technology Total |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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