Correlation Between Taiwan Weighted and Digital China
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and Digital China 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 Digital China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Digital China Holdings, you can compare the effects of market volatilities on Taiwan Weighted and Digital China 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 Digital China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Digital China.
Diversification Opportunities for Taiwan Weighted and Digital China
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and Digital is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Digital China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital China Holdings 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 Digital China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital China Holdings has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Digital China go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Digital China
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the Digital China. But the index apears to be less risky and, when comparing its historical volatility, Taiwan Weighted is 3.28 times less risky than Digital China. The index trades about -0.18 of its potential returns per unit of risk. The Digital China Holdings is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 584.00 in Digital China Holdings on August 24, 2024 and sell it today you would earn a total of 98.00 from holding Digital China Holdings or generate 16.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Taiwan Weighted vs. Digital China Holdings
Performance |
| Timeline |
Taiwan Weighted and Digital China Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Digital China Holdings
Pair trading matchups for Digital China
Pair Trading with Taiwan Weighted and Digital China
The main advantage of trading using opposite Taiwan Weighted and Digital China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, Digital China 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 Digital China will offset losses from the drop in Digital China's long position.| Taiwan Weighted vs. First Hotel Co | Taiwan Weighted vs. Great China Metal | Taiwan Weighted vs. HOYA Resort Hotel | Taiwan Weighted vs. Kindom Construction Corp |
| Digital China vs. Acer E Enabling Service | Digital China vs. Sysage Technology Co | Digital China vs. Wistron Information Technology | Digital China vs. Green World Fintech |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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