Correlation Between Ocean Plastics and Tainan Spinning

Can any of the company-specific risk be diversified away by investing in both Ocean Plastics and Tainan Spinning 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 Ocean Plastics and Tainan Spinning into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Ocean Plastics and Tainan Spinning

-0.01

Correlation Coefficient

Ocean Plastics  Tainan Spinning

Good diversification

The 3 months correlation between Ocean and Tainan is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Plastics Co and Tainan Spinning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Spinning and Ocean Plastics 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 Ocean Plastics Co are associated (or correlated) with Tainan Spinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Spinning has no effect on the direction of Ocean Plastics i.e., Ocean Plastics and Tainan Spinning go up and down completely randomly.

Pair Corralation between Ocean Plastics and Tainan Spinning

Assuming the 90 days trading horizon Ocean Plastics Co is expected to generate 1.06 times more return on investment than Tainan Spinning. However, Ocean Plastics is 1.06 times more volatile than Tainan Spinning Co. It trades about 0.0 of its potential returns per unit of risk. Tainan Spinning Co is currently generating about -0.09 per unit of risk. If you would invest  3,930  in Ocean Plastics Co on December 24, 2024 and sell it today you would lose (145.00) from holding Ocean Plastics Co or give up 3.69% of portfolio value over 90 days.

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

Ocean Plastics Co  vs.  Tainan Spinning Co

Ocean Plastics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Plastics Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ocean Plastics showed solid returns over the last few months and may actually be approaching a breakup point.

Tainan Spinning

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tainan Spinning Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tainan Spinning 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 Ocean Plastics and Tainan Spinning

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

The idea behind Ocean Plastics Co and Tainan Spinning 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.