Correlation Between Taiwan Weighted and Shin Tai
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and Shin Tai 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 Weighted and Shin Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Shin Tai Industry, you can compare the effects of market volatilities on Taiwan Weighted and Shin Tai 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 Weighted with a short position of Shin Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Shin Tai.
Diversification Opportunities for Taiwan Weighted and Shin Tai
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Shin is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Shin Tai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Tai Industry and Taiwan Weighted 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 Weighted are associated (or correlated) with Shin Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Tai Industry has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Shin Tai go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Shin Tai
Assuming the 90 days trading horizon Taiwan Weighted is expected to generate 1.82 times less return on investment than Shin Tai. But when comparing it to its historical volatility, Taiwan Weighted is 1.54 times less risky than Shin Tai. It trades about 0.09 of its potential returns per unit of risk. Shin Tai Industry is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,950 in Shin Tai Industry on August 26, 2024 and sell it today you would earn a total of 8,050 from holding Shin Tai Industry or generate 115.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.75% |
| Values | Daily Returns |
Taiwan Weighted vs. Shin Tai Industry
Performance |
| Timeline |
Taiwan Weighted and Shin Tai Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Shin Tai Industry
Pair trading matchups for Shin Tai
Pair Trading with Taiwan Weighted and Shin Tai
The main advantage of trading using opposite Taiwan Weighted and Shin Tai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, Shin Tai 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 Shin Tai will offset losses from the drop in Shin Tai's long position.| Taiwan Weighted vs. Ibase Gaming | Taiwan Weighted vs. Ching Feng Home | Taiwan Weighted vs. Jinan Acetate Chemical | Taiwan Weighted vs. Hsinli Chemical Industrial |
| Shin Tai vs. Lian Hwa Foods | Shin Tai vs. Uni President Enterprises Corp | Shin Tai vs. Taiwan Cement Corp | Shin Tai vs. Ruentex Development 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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