Correlation Between Taiwan Cement and Taiwan Fertilizer

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

By analyzing existing cross correlation between Taiwan Cement Corp and Taiwan Fertilizer Co, you can compare the effects of market volatilities on Taiwan Cement and Taiwan Fertilizer 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 Cement with a short position of Taiwan Fertilizer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Taiwan Fertilizer.

Diversification Opportunities for Taiwan Cement and Taiwan Fertilizer

-0.29

Correlation Coefficient

Taiwan Cement  Taiwan Fertilizer

Very good diversification

The 3 months correlation between Taiwan and Taiwan is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Taiwan Fertilizer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Fertilizer and Taiwan Cement 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 Cement Corp are associated (or correlated) with Taiwan Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Fertilizer has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Taiwan Fertilizer go up and down completely randomly.

Pair Corralation between Taiwan Cement and Taiwan Fertilizer

Assuming the 90 days trading horizon Taiwan Cement Corp is expected to under-perform the Taiwan Fertilizer. In addition to that, Taiwan Cement is 1.0 times more volatile than Taiwan Fertilizer Co. It trades about 0.0 of its total potential returns per unit of risk. Taiwan Fertilizer Co is currently generating about 0.01 per unit of volatility. If you would invest  5,340  in Taiwan Fertilizer Co on September 16, 2024 and sell it today you would earn a total of  70.00  from holding Taiwan Fertilizer Co or generate 1.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Taiwan Cement Corp  vs.  Taiwan Fertilizer Co

Taiwan Cement Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Cement Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Cement is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Fertilizer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Fertilizer Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Taiwan Cement and Taiwan Fertilizer

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

The idea behind Taiwan Cement Corp and Taiwan Fertilizer Co 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.