Correlation Between Hunya Foods and Taiwan Weighted

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

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

Diversification Opportunities for Hunya Foods and Taiwan Weighted

-0.25

Correlation Coefficient

Hunya Foods  Taiwan Weighted

Very good diversification

The 3 months correlation between Hunya and Taiwan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hunya Foods Co and Taiwan Weighted in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Weighted and Hunya Foods 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 Hunya Foods Co are associated (or correlated) with Taiwan Weighted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Weighted has no effect on the direction of Hunya Foods i.e., Hunya Foods and Taiwan Weighted go up and down completely randomly.

Pair Corralation between Hunya Foods and Taiwan Weighted

Assuming the 90 days trading horizon Hunya Foods Co is expected to under-perform the Taiwan Weighted. But the stock apears to be less risky and, when comparing its historical volatility, Hunya Foods Co is 2.21 times less risky than Taiwan Weighted. The stock trades about -0.05 of its potential returns per unit of risk. The Taiwan Weighted is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,254,654  in Taiwan Weighted on September 19, 2024 and sell it today you would earn a total of  47,147  from holding Taiwan Weighted or generate 2.09% return on investment over 90 days.

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

Hunya Foods Co  vs.  Taiwan Weighted

Pair Trading with Hunya Foods and Taiwan Weighted

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

The idea behind Hunya Foods Co and Taiwan Weighted 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.