Correlation Between Taiwan Weighted and Te Chang
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and Te Chang 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 Te Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Te Chang Construction, you can compare the effects of market volatilities on Taiwan Weighted and Te Chang 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 Te Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Te Chang.
Diversification Opportunities for Taiwan Weighted and Te Chang
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and 5511 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Te Chang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Te Chang 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 Te Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Te Chang Construction has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Te Chang go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Te Chang
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the Te Chang. But the index apears to be less risky and, when comparing its historical volatility, Taiwan Weighted is 1.03 times less risky than Te Chang. The index trades about -0.11 of its potential returns per unit of risk. The Te Chang Construction is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,150 in Te Chang Construction on August 28, 2024 and sell it today you would earn a total of 130.00 from holding Te Chang Construction or generate 2.11% 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. Te Chang Construction
Performance |
| Timeline |
Taiwan Weighted and Te Chang Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Te Chang Construction
Pair trading matchups for Te Chang
Pair Trading with Taiwan Weighted and Te Chang
The main advantage of trading using opposite Taiwan Weighted and Te Chang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, Te Chang 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 Te Chang will offset losses from the drop in Te Chang's long position.| Taiwan Weighted vs. Kworld Computer Co | Taiwan Weighted vs. FDC International Hotels | Taiwan Weighted vs. Wonderful Hi Tech Co | Taiwan Weighted vs. Landis Taipei Hotel |
| Te Chang vs. United Integrated Services | Te Chang vs. CTCI Corp | Te Chang vs. Ruentex Engineering Construction | Te Chang vs. BES Engineering 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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