Correlation Between Taiwan Cement and U Tech

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

Diversification Opportunities for Taiwan Cement and U Tech

0.74

Correlation Coefficient

Taiwan Cement  U Tech

Poor diversification

The 3 months correlation between Taiwan and 3050 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and U Tech Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Tech Media 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 U Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Tech Media has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and U Tech go up and down completely randomly.

Pair Corralation between Taiwan Cement and U Tech

Assuming the 90 days trading horizon Taiwan Cement Corp is expected to generate 0.07 times more return on investment than U Tech. However, Taiwan Cement Corp is 15.18 times less risky than U Tech. It trades about -0.12 of its potential returns per unit of risk. U Tech Media Corp is currently generating about -0.08 per unit of risk. If you would invest  4,700  in Taiwan Cement Corp on September 29, 2024 and sell it today you would lose (50.00) from holding Taiwan Cement Corp or give up 1.06% of portfolio value over 90 days.

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

Taiwan Cement Corp  vs.  U Tech Media 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 comparatively stable basic indicators, Taiwan Cement is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

U Tech Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days U Tech Media Corp 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 U Tech

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

The idea behind Taiwan Cement Corp and U Tech Media 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.