Correlation Between National Petroleum and Taiwan Cogeneration
Can any of the company-specific risk be diversified away by investing in both National Petroleum and Taiwan Cogeneration 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 National Petroleum and Taiwan Cogeneration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Petroleum Co and Taiwan Cogeneration Corp, you can compare the effects of market volatilities on National Petroleum and Taiwan Cogeneration 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 National Petroleum with a short position of Taiwan Cogeneration. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Petroleum and Taiwan Cogeneration.
Diversification Opportunities for National Petroleum and Taiwan Cogeneration
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and Taiwan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding National Petroleum Co and Taiwan Cogeneration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cogeneration Corp and National Petroleum 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 National Petroleum Co are associated (or correlated) with Taiwan Cogeneration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cogeneration Corp has no effect on the direction of National Petroleum i.e., National Petroleum and Taiwan Cogeneration go up and down completely randomly.
Pair Corralation between National Petroleum and Taiwan Cogeneration
Assuming the 90 days trading horizon National Petroleum Co is expected to under-perform the Taiwan Cogeneration. But the stock apears to be less risky and, when comparing its historical volatility, National Petroleum Co is 1.21 times less risky than Taiwan Cogeneration. The stock trades about -0.24 of its potential returns per unit of risk. The Taiwan Cogeneration Corp is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 4,370 in Taiwan Cogeneration Corp on September 12, 2024 and sell it today you would lose (120.00) from holding Taiwan Cogeneration Corp or give up 2.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Petroleum Co vs. Taiwan Cogeneration Corp
Performance |
| Timeline |
| National Petroleum |
| Taiwan Cogeneration Corp |
National Petroleum and Taiwan Cogeneration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Petroleum and Taiwan Cogeneration
The main advantage of trading using opposite National Petroleum and Taiwan Cogeneration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Petroleum position performs unexpectedly, Taiwan Cogeneration 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 Taiwan Cogeneration will offset losses from the drop in Taiwan Cogeneration's long position.| National Petroleum vs. Taiwan Shin Kong | National Petroleum vs. Taiwan Secom Co | National Petroleum vs. Great Taipei Gas | National Petroleum vs. CTCI Corp |
| Taiwan Cogeneration vs. Great Taipei Gas | Taiwan Cogeneration vs. Taiwan Cement Corp | Taiwan Cogeneration vs. Mega Financial Holding | Taiwan Cogeneration vs. First Financial Holding |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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