Correlation Between Taiwan Weighted and New Asia
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and New Asia 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 New Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and New Asia Construction, you can compare the effects of market volatilities on Taiwan Weighted and New Asia 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 New Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and New Asia.
Diversification Opportunities for Taiwan Weighted and New Asia
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and New is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction 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 New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and New Asia go up and down completely randomly.
Pair Corralation between Taiwan Weighted and New Asia
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the New Asia. But the index apears to be less risky and, when comparing its historical volatility, Taiwan Weighted is 1.79 times less risky than New Asia. The index trades about -0.13 of its potential returns per unit of risk. The New Asia Construction is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,220 in New Asia Construction on August 30, 2024 and sell it today you would earn a total of 150.00 from holding New Asia Construction or generate 12.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Taiwan Weighted vs. New Asia Construction
Performance |
| Timeline |
Taiwan Weighted and New Asia Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
New Asia Construction
Pair trading matchups for New Asia
Pair Trading with Taiwan Weighted and New Asia
The main advantage of trading using opposite Taiwan Weighted and New Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, New Asia 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 New Asia will offset losses from the drop in New Asia's long position.| Taiwan Weighted vs. V Tac Technology Co | Taiwan Weighted vs. Sesoda Corp | Taiwan Weighted vs. Asmedia Technology | Taiwan Weighted vs. Oceanic Beverages Co |
| New Asia vs. Yulon Motor Co | New Asia vs. Far Eastern Department | New Asia vs. China Steel Corp | New Asia vs. Chang Hwa Commercial |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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