Correlation Between Taiwan Hon and Feng Tay
Can any of the company-specific risk be diversified away by investing in both Taiwan Hon and Feng Tay 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 Feng Tay 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 Feng Tay Enterprises, you can compare the effects of market volatilities on Taiwan Hon and Feng Tay 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 Feng Tay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Hon and Feng Tay.
Diversification Opportunities for Taiwan Hon and Feng Tay
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Feng is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Hon Chuan and Feng Tay Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feng Tay Enterprises 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 Feng Tay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feng Tay Enterprises has no effect on the direction of Taiwan Hon i.e., Taiwan Hon and Feng Tay go up and down completely randomly.
Pair Corralation between Taiwan Hon and Feng Tay
Assuming the 90 days trading horizon Taiwan Hon Chuan is expected to generate 1.04 times more return on investment than Feng Tay. However, Taiwan Hon is 1.04 times more volatile than Feng Tay Enterprises. It trades about -0.13 of its potential returns per unit of risk. Feng Tay Enterprises is currently generating about -0.27 per unit of risk. If you would invest 15,300 in Taiwan Hon Chuan on September 1, 2024 and sell it today you would lose (600.00) from holding Taiwan Hon Chuan or give up 3.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Taiwan Hon Chuan vs. Feng Tay Enterprises
Performance |
| Timeline |
| Taiwan Hon Chuan |
| Feng Tay Enterprises |
Taiwan Hon and Feng Tay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Hon and Feng Tay
The main advantage of trading using opposite Taiwan Hon and Feng Tay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Hon position performs unexpectedly, Feng Tay 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 Feng Tay will offset losses from the drop in Feng Tay's long position.| Taiwan Hon vs. Connection Technology Systems | Taiwan Hon vs. Nova Technology | Taiwan Hon vs. Advanced Wireless Semiconductor | Taiwan Hon vs. STL Technology Co |
| Feng Tay vs. Pou Chen Corp | Feng Tay vs. Eclat Textile Co | Feng Tay vs. Hotai Motor Co | Feng Tay vs. Giant Manufacturing Co |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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