Correlation Between YuantaP Shares and Taiwan Union

Can any of the company-specific risk be diversified away by investing in both YuantaP Shares and Taiwan Union 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 YuantaP Shares and Taiwan Union into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between YuantaP shares Taiwan Top and Taiwan Union Technology, you can compare the effects of market volatilities on YuantaP Shares and Taiwan Union 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 YuantaP Shares with a short position of Taiwan Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and Taiwan Union.

Diversification Opportunities for YuantaP Shares and Taiwan Union

0.01

Correlation Coefficient

YuantaP Shares  Taiwan Union

Significant diversification

The 3 months correlation between YuantaP and Taiwan is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan Top and Taiwan Union Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Union Technology and YuantaP Shares 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 YuantaP shares Taiwan Top are associated (or correlated) with Taiwan Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Union Technology has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and Taiwan Union go up and down completely randomly.

Pair Corralation between YuantaP Shares and Taiwan Union

Assuming the 90 days trading horizon YuantaP Shares is expected to generate 2.11 times less return on investment than Taiwan Union. But when comparing it to its historical volatility, YuantaP shares Taiwan Top is 2.42 times less risky than Taiwan Union. It trades about 0.09 of its potential returns per unit of risk. Taiwan Union Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,219  in Taiwan Union Technology on December 5, 2024 and sell it today you would earn a total of  10,231  from holding Taiwan Union Technology or generate 164.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.55%
Values	Daily Returns

YuantaP shares Taiwan Top  vs.  Taiwan Union Technology

YuantaP shares Taiwan

Risk-Adjusted Performance

Very Weak

Over the last 90 days YuantaP shares Taiwan Top has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, YuantaP Shares is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Union Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taiwan Union Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Union is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with YuantaP Shares and Taiwan Union

The main advantage of trading using opposite YuantaP Shares and Taiwan Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YuantaP Shares position performs unexpectedly, Taiwan Union 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 Union will offset losses from the drop in Taiwan Union's long position.

The idea behind YuantaP shares Taiwan Top and Taiwan Union Technology 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.