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
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Taiwan and Taiwan is -0.01. 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 generate 1.36 times more return on investment than Taiwan Fu. However, Taiwan Paiho is 1.36 times more volatile than Taiwan Fu Hsing. It trades about 0.06 of its potential returns per unit of risk. Taiwan Fu Hsing is currently generating about 0.05 per unit of risk. If you would invest 5,265 in Taiwan Paiho on September 1, 2024 and sell it today you would earn a total of 2,515 from holding Taiwan Paiho or generate 47.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| 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. Chaintech Technology Corp | Taiwan Paiho vs. AVerMedia Technologies | Taiwan Paiho vs. Avision | Taiwan Paiho vs. Clevo Co |
| Taiwan Fu vs. Taiwan Shin Kong | Taiwan Fu vs. Taiwan Secom Co | Taiwan Fu vs. Pou Chen Corp | Taiwan Fu vs. Taiwan Hon Chuan |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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