Correlation Between Taiwan Weighted and Lotes
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and Lotes 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 Lotes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Lotes Co, you can compare the effects of market volatilities on Taiwan Weighted and Lotes 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 Lotes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Lotes.
Diversification Opportunities for Taiwan Weighted and Lotes
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Taiwan and Lotes is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Lotes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotes 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 Lotes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotes has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Lotes go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Lotes
Assuming the 90 days trading horizon Taiwan Weighted is expected to generate 3.76 times less return on investment than Lotes. But when comparing it to its historical volatility, Taiwan Weighted is 2.19 times less risky than Lotes. It trades about 0.03 of its potential returns per unit of risk. Lotes Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 159,500 in Lotes Co on September 1, 2024 and sell it today you would earn a total of 19,500 from holding Lotes Co or generate 12.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.06% |
| Values | Daily Returns |
Taiwan Weighted vs. Lotes Co
Performance |
| Timeline |
Taiwan Weighted and Lotes Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Lotes Co
Pair trading matchups for Lotes
Pair Trading with Taiwan Weighted and Lotes
The main advantage of trading using opposite Taiwan Weighted and Lotes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, Lotes 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 Lotes will offset losses from the drop in Lotes' 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 |
| Lotes vs. Unimicron Technology Corp | Lotes vs. Alchip Technologies | Lotes vs. Nan Ya Printed | Lotes vs. Global Unichip Corp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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