Correlation Between Taiwan Weighted and Taiwan IC
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and Taiwan IC 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 Taiwan IC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Taiwan IC Packaging, you can compare the effects of market volatilities on Taiwan Weighted and Taiwan IC 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 Taiwan IC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Taiwan IC.
Diversification Opportunities for Taiwan Weighted and Taiwan IC
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Taiwan and Taiwan is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Taiwan IC Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan IC Packaging 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 Taiwan IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan IC Packaging has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Taiwan IC go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Taiwan IC
Assuming the 90 days trading horizon Taiwan Weighted is expected to generate 0.59 times more return on investment than Taiwan IC. However, Taiwan Weighted is 1.69 times less risky than Taiwan IC. It trades about -0.11 of its potential returns per unit of risk. Taiwan IC Packaging is currently generating about -0.37 per unit of risk. If you would invest 2,278,008 in Taiwan Weighted on September 2, 2024 and sell it today you would lose (51,758) from holding Taiwan Weighted or give up 2.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Weighted vs. Taiwan IC Packaging
Performance |
| Timeline |
Taiwan Weighted and Taiwan IC Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Taiwan IC Packaging
Pair trading matchups for Taiwan IC
Pair Trading with Taiwan Weighted and Taiwan IC
The main advantage of trading using opposite Taiwan Weighted and Taiwan IC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, Taiwan IC 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 Taiwan IC will offset losses from the drop in Taiwan IC's long position.| Taiwan Weighted vs. Wei Chuan Foods | Taiwan Weighted vs. Sunny Friend Environmental | Taiwan Weighted vs. Mayer Steel Pipe | Taiwan Weighted vs. Standard Foods Corp |
| Taiwan IC vs. Excelsior Medical Co | Taiwan IC vs. Winstek Semiconductor Co | Taiwan IC vs. Simple Mart Retail | Taiwan IC vs. Li Kang Biomedical |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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