Correlation Between Taiwan Styrene and First Copper

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

By analyzing existing cross correlation between Taiwan Styrene Monomer and First Copper Technology, you can compare the effects of market volatilities on Taiwan Styrene and First Copper 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 Styrene with a short position of First Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Styrene and First Copper.

Diversification Opportunities for Taiwan Styrene and First Copper

0.81

Correlation Coefficient

Taiwan Styrene  First Copper

Very poor diversification

The 3 months correlation between Taiwan and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Styrene Monomer and First Copper Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Copper Technology and Taiwan Styrene 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 Styrene Monomer are associated (or correlated) with First Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Copper Technology has no effect on the direction of Taiwan Styrene i.e., Taiwan Styrene and First Copper go up and down completely randomly.

Pair Corralation between Taiwan Styrene and First Copper

Assuming the 90 days trading horizon Taiwan Styrene is expected to generate 4.06 times less return on investment than First Copper. But when comparing it to its historical volatility, Taiwan Styrene Monomer is 1.34 times less risky than First Copper. It trades about 0.03 of its potential returns per unit of risk. First Copper Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,795  in First Copper Technology on December 23, 2024 and sell it today you would earn a total of  510.00  from holding First Copper Technology or generate 13.44% return on investment over 90 days.

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

Taiwan Styrene Monomer  vs.  First Copper Technology

Taiwan Styrene Monomer

Risk-Adjusted Performance

Weak

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

First Copper Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Copper Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, First Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Styrene and First Copper

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

The idea behind Taiwan Styrene Monomer and First Copper Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.