Correlation Between Taiwan Weighted and China Steel
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and China Steel 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 China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and China Steel Structure, you can compare the effects of market volatilities on Taiwan Weighted and China Steel 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 China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and China Steel.
Diversification Opportunities for Taiwan Weighted and China Steel
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and China is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and China Steel Structure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Structure 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 China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Structure has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and China Steel go up and down completely randomly.
Pair Corralation between Taiwan Weighted and China Steel
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the China Steel. In addition to that, Taiwan Weighted is 1.44 times more volatile than China Steel Structure. It trades about -0.12 of its total potential returns per unit of risk. China Steel Structure is currently generating about -0.07 per unit of volatility. If you would invest 5,360 in China Steel Structure on August 31, 2024 and sell it today you would lose (60.00) from holding China Steel Structure or give up 1.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Taiwan Weighted vs. China Steel Structure
Performance |
| Timeline |
Taiwan Weighted and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
China Steel Structure
Pair trading matchups for China Steel
Pair Trading with Taiwan Weighted and China Steel
The main advantage of trading using opposite Taiwan Weighted and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, China Steel 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 China Steel will offset losses from the drop in China Steel's long position.| Taiwan Weighted vs. Asustek Computer | Taiwan Weighted vs. Grand Plastic Technology | Taiwan Weighted vs. Cheng Mei Materials | Taiwan Weighted vs. Ruentex Materials Co |
| China Steel vs. Chung Hung Steel | China Steel vs. China Steel Corp | China Steel vs. Chun Yuan Steel | China Steel vs. Hsin Kuang Steel |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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