Correlation Between Taiwan Weighted and FDC International
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and FDC International 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 FDC International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and FDC International Hotels, you can compare the effects of market volatilities on Taiwan Weighted and FDC International 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 FDC International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and FDC International.
Diversification Opportunities for Taiwan Weighted and FDC International
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and FDC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and FDC International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDC International Hotels 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 FDC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDC International Hotels has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and FDC International go up and down completely randomly.
Pair Corralation between Taiwan Weighted and FDC International
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the FDC International. But the index apears to be less risky and, when comparing its historical volatility, Taiwan Weighted is 1.37 times less risky than FDC International. The index trades about -0.11 of its potential returns per unit of risk. The FDC International Hotels is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 5,900 in FDC International Hotels on September 1, 2024 and sell it today you would earn a total of 270.00 from holding FDC International Hotels or generate 4.58% 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. FDC International Hotels
Performance |
| Timeline |
Taiwan Weighted and FDC International Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
FDC International Hotels
Pair trading matchups for FDC International
Pair Trading with Taiwan Weighted and FDC International
The main advantage of trading using opposite Taiwan Weighted and FDC International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, FDC International 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 FDC International will offset losses from the drop in FDC International'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 |
| FDC International vs. Chaintech Technology Corp | FDC International vs. AVerMedia Technologies | FDC International vs. Avision | FDC International vs. Clevo 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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