Correlation Between Taiwan Hon and Allis Electric
Can any of the company-specific risk be diversified away by investing in both Taiwan Hon and Allis Electric 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 Hon and Allis Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Hon Chuan and Allis Electric Co, you can compare the effects of market volatilities on Taiwan Hon and Allis Electric 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 Hon with a short position of Allis Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Hon and Allis Electric.
Diversification Opportunities for Taiwan Hon and Allis Electric
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Allis is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Hon Chuan and Allis Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allis Electric and Taiwan Hon 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 Hon Chuan are associated (or correlated) with Allis Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allis Electric has no effect on the direction of Taiwan Hon i.e., Taiwan Hon and Allis Electric go up and down completely randomly.
Pair Corralation between Taiwan Hon and Allis Electric
Assuming the 90 days trading horizon Taiwan Hon Chuan is expected to generate 0.62 times more return on investment than Allis Electric. However, Taiwan Hon Chuan is 1.62 times less risky than Allis Electric. It trades about -0.1 of its potential returns per unit of risk. Allis Electric Co is currently generating about -0.07 per unit of risk. If you would invest 16,050 in Taiwan Hon Chuan on September 12, 2024 and sell it today you would lose (1,450) from holding Taiwan Hon Chuan or give up 9.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Taiwan Hon Chuan vs. Allis Electric Co
Performance |
| Timeline |
| Taiwan Hon Chuan |
| Allis Electric |
Taiwan Hon and Allis Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Hon and Allis Electric
The main advantage of trading using opposite Taiwan Hon and Allis Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Hon position performs unexpectedly, Allis Electric 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 Allis Electric will offset losses from the drop in Allis Electric's long position.| Taiwan Hon vs. China Mobile | Taiwan Hon vs. TWOWAY Communications | Taiwan Hon vs. X Legend Entertainment Co | Taiwan Hon vs. Gamania Digital Entertainment |
| Allis Electric vs. Chung Hsin Electric Machinery | Allis Electric vs. Fortune Electric Co | Allis Electric vs. TECO Electric Machinery | Allis Electric vs. Shihlin Electric Engineering |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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