Correlation Between Taiwan Weighted and Johnson Health
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and Johnson Health 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 Johnson Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Johnson Health Tech, you can compare the effects of market volatilities on Taiwan Weighted and Johnson Health 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 Johnson Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Johnson Health.
Diversification Opportunities for Taiwan Weighted and Johnson Health
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Johnson is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Johnson Health Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Health Tech 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 Johnson Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Health Tech has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Johnson Health go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Johnson Health
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the Johnson Health. But the index apears to be less risky and, when comparing its historical volatility, Taiwan Weighted is 4.82 times less risky than Johnson Health. The index trades about -0.1 of its potential returns per unit of risk. The Johnson Health Tech is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 15,250 in Johnson Health Tech on August 26, 2024 and sell it today you would lose (50.00) from holding Johnson Health Tech or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Taiwan Weighted vs. Johnson Health Tech
Performance |
| Timeline |
Taiwan Weighted and Johnson Health Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Johnson Health Tech
Pair trading matchups for Johnson Health
Pair Trading with Taiwan Weighted and Johnson Health
The main advantage of trading using opposite Taiwan Weighted and Johnson Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, Johnson Health 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 Johnson Health will offset losses from the drop in Johnson Health'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 |
| Johnson Health vs. Taiwan Semiconductor Manufacturing | Johnson Health vs. Hon Hai Precision | Johnson Health vs. MediaTek | Johnson Health vs. Chunghwa Telecom 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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