Correlation Between Taiwan Cement and Delpha Construction

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

Diversification Opportunities for Taiwan Cement and Delpha Construction

0.83

Correlation Coefficient

Taiwan Cement  Delpha Construction

Very poor diversification

The 3 months correlation between Taiwan and Delpha is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Delpha Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delpha Construction 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 Delpha Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delpha Construction has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Delpha Construction go up and down completely randomly.

Pair Corralation between Taiwan Cement and Delpha Construction

Assuming the 90 days trading horizon Taiwan Cement Corp is expected to under-perform the Delpha Construction. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Cement Corp is 1.94 times less risky than Delpha Construction. The stock trades about -0.02 of its potential returns per unit of risk. The Delpha Construction Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,765  in Delpha Construction Co on October 23, 2024 and sell it today you would earn a total of  2,050  from holding Delpha Construction Co or generate 116.15% return on investment over 90 days.

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

Taiwan Cement Corp  vs.  Delpha Construction Co

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Delpha Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delpha Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Delpha Construction 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 Taiwan Cement and Delpha Construction

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

The idea behind Taiwan Cement Corp and Delpha Construction 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.