Correlation Between Taiwan Hon and Globe Union
Can any of the company-specific risk be diversified away by investing in both Taiwan Hon and Globe Union 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 Globe Union 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 Globe Union Industrial, you can compare the effects of market volatilities on Taiwan Hon and Globe Union 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 Globe Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Hon and Globe Union.
Diversification Opportunities for Taiwan Hon and Globe Union
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Globe is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Hon Chuan and Globe Union Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Union Industrial 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 Globe Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Union Industrial has no effect on the direction of Taiwan Hon i.e., Taiwan Hon and Globe Union go up and down completely randomly.
Pair Corralation between Taiwan Hon and Globe Union
Assuming the 90 days trading horizon Taiwan Hon Chuan is expected to generate 0.57 times more return on investment than Globe Union. However, Taiwan Hon Chuan is 1.76 times less risky than Globe Union. It trades about -0.07 of its potential returns per unit of risk. Globe Union Industrial is currently generating about -0.26 per unit of risk. If you would invest 15,500 in Taiwan Hon Chuan on August 28, 2024 and sell it today you would lose (350.00) from holding Taiwan Hon Chuan or give up 2.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Hon Chuan vs. Globe Union Industrial
Performance |
| Timeline |
| Taiwan Hon Chuan |
| Globe Union Industrial |
Taiwan Hon and Globe Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Hon and Globe Union
The main advantage of trading using opposite Taiwan Hon and Globe Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Hon position performs unexpectedly, Globe Union 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 Globe Union will offset losses from the drop in Globe Union's long position.The idea behind Taiwan Hon Chuan and Globe Union Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Globe Union vs. Sunny Friend Environmental | Globe Union vs. TTET Union Corp | Globe Union vs. ECOVE Environment Corp | Globe Union vs. Yulon Finance Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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