Correlation Between Taiwan Cement and Inventec Corp

Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and Inventec Corp 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 Inventec Corp 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 Inventec Corp, you can compare the effects of market volatilities on Taiwan Cement and Inventec Corp 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 Inventec Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Inventec Corp.

Diversification Opportunities for Taiwan Cement and Inventec Corp

-0.02

Correlation Coefficient

Taiwan Cement  Inventec Corp

Good diversification

The 3 months correlation between Taiwan and Inventec is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Inventec Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inventec Corp 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 Inventec Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inventec Corp has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Inventec Corp go up and down completely randomly.

Pair Corralation between Taiwan Cement and Inventec Corp

Assuming the 90 days trading horizon Taiwan Cement Corp is expected to under-perform the Inventec Corp. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Cement Corp is 2.47 times less risky than Inventec Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Inventec Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,585  in Inventec Corp on October 23, 2024 and sell it today you would earn a total of  410.00  from holding Inventec Corp or generate 8.94% 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.  Inventec Corp

Taiwan Cement Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Cement Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Inventec Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inventec Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Inventec Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Taiwan Cement and Inventec Corp

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

The idea behind Taiwan Cement Corp and Inventec Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.