Correlation Between Taiwan Weighted and Depo Auto
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and Depo Auto 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 Depo Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Depo Auto Parts, you can compare the effects of market volatilities on Taiwan Weighted and Depo Auto 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 Depo Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Depo Auto.
Diversification Opportunities for Taiwan Weighted and Depo Auto
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Taiwan and Depo is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Depo Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Depo Auto Parts 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 Depo Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Depo Auto Parts has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Depo Auto go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Depo Auto
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the Depo Auto. But the index apears to be less risky and, when comparing its historical volatility, Taiwan Weighted is 1.65 times less risky than Depo Auto. The index trades about -0.14 of its potential returns per unit of risk. The Depo Auto Parts is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 21,100 in Depo Auto Parts on November 7, 2024 and sell it today you would earn a total of 50.00 from holding Depo Auto Parts or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Weighted vs. Depo Auto Parts
Performance |
| Timeline |
Taiwan Weighted and Depo Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Weighted and Depo Auto
The main advantage of trading using opposite Taiwan Weighted and Depo Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, Depo Auto 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 Depo Auto will offset losses from the drop in Depo Auto's long position.The idea behind Taiwan Weighted and Depo Auto Parts pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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