Correlation Between Taiwan Hon and Century Iron
Can any of the company-specific risk be diversified away by investing in both Taiwan Hon and Century Iron 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 Century Iron 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 Century Iron And, you can compare the effects of market volatilities on Taiwan Hon and Century Iron 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 Century Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Hon and Century Iron.
Diversification Opportunities for Taiwan Hon and Century Iron
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Century is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Hon Chuan and Century Iron And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Iron And 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 Century Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Iron And has no effect on the direction of Taiwan Hon i.e., Taiwan Hon and Century Iron go up and down completely randomly.
Pair Corralation between Taiwan Hon and Century Iron
Assuming the 90 days trading horizon Taiwan Hon Chuan is expected to generate 0.43 times more return on investment than Century Iron. However, Taiwan Hon Chuan is 2.32 times less risky than Century Iron. It trades about -0.17 of its potential returns per unit of risk. Century Iron And is currently generating about -0.19 per unit of risk. If you would invest 16,700 in Taiwan Hon Chuan on August 27, 2024 and sell it today you would lose (1,450) from holding Taiwan Hon Chuan or give up 8.68% 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. Century Iron And
Performance |
| Timeline |
| Taiwan Hon Chuan |
| Century Iron And |
Taiwan Hon and Century Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Hon and Century Iron
The main advantage of trading using opposite Taiwan Hon and Century Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Hon position performs unexpectedly, Century Iron 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 Century Iron will offset losses from the drop in Century Iron's long position.| Taiwan Hon vs. Century Iron And | Taiwan Hon vs. Easywell Biomedicals | Taiwan Hon vs. Chung Hung Steel | Taiwan Hon vs. China Steel Corp |
| Century Iron vs. Cheng Shin Rubber | Century Iron vs. China Steel Chemical | Century Iron vs. Yulon Motor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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