Correlation Between Taiwan Paiho and Taiwan Fu
Can any of the company-specific risk be diversified away by investing in both Taiwan Paiho and Taiwan Fu 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 Paiho and Taiwan Fu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Paiho and Taiwan Fu Hsing, you can compare the effects of market volatilities on Taiwan Paiho and Taiwan Fu 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 Paiho with a short position of Taiwan Fu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Paiho and Taiwan Fu.
Diversification Opportunities for Taiwan Paiho and Taiwan Fu
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Taiwan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Paiho and Taiwan Fu Hsing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Fu Hsing and Taiwan Paiho 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 Paiho are associated (or correlated) with Taiwan Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Fu Hsing has no effect on the direction of Taiwan Paiho i.e., Taiwan Paiho and Taiwan Fu go up and down completely randomly.
Pair Corralation between Taiwan Paiho and Taiwan Fu
Assuming the 90 days trading horizon Taiwan Paiho is expected to under-perform the Taiwan Fu. In addition to that, Taiwan Paiho is 1.85 times more volatile than Taiwan Fu Hsing. It trades about -0.07 of its total potential returns per unit of risk. Taiwan Fu Hsing is currently generating about -0.01 per unit of volatility. If you would invest 5,200 in Taiwan Fu Hsing on October 23, 2024 and sell it today you would lose (10.00) from holding Taiwan Fu Hsing or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Paiho vs. Taiwan Fu Hsing
Performance |
| Timeline |
| Taiwan Paiho |
| Taiwan Fu Hsing |
Taiwan Paiho and Taiwan Fu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Paiho and Taiwan Fu
The main advantage of trading using opposite Taiwan Paiho and Taiwan Fu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Paiho position performs unexpectedly, Taiwan Fu 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 Fu will offset losses from the drop in Taiwan Fu's long position.| Taiwan Paiho vs. Feng Tay Enterprises | Taiwan Paiho vs. Makalot Industrial Co | Taiwan Paiho vs. Pou Chen Corp | Taiwan Paiho vs. Eclat Textile Co |
| Taiwan Fu vs. Basso Industry Corp | Taiwan Fu vs. Kaulin Mfg | Taiwan Fu vs. TYC Brother Industrial | Taiwan Fu vs. Chung Hsin Electric Machinery |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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