Correlation Between SanDi Properties and Taiwan Navigation

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

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

Diversification Opportunities for SanDi Properties and Taiwan Navigation

0.24

Correlation Coefficient

SanDi Properties  Taiwan Navigation

Modest diversification

The 3 months correlation between SanDi and Taiwan is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding SanDi Properties Co and Taiwan Navigation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Navigation and SanDi Properties 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 SanDi Properties Co are associated (or correlated) with Taiwan Navigation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Navigation has no effect on the direction of SanDi Properties i.e., SanDi Properties and Taiwan Navigation go up and down completely randomly.

Pair Corralation between SanDi Properties and Taiwan Navigation

Assuming the 90 days trading horizon SanDi Properties Co is expected to under-perform the Taiwan Navigation. In addition to that, SanDi Properties is 1.11 times more volatile than Taiwan Navigation Co. It trades about -0.13 of its total potential returns per unit of risk. Taiwan Navigation Co is currently generating about 0.47 per unit of volatility. If you would invest  2,870  in Taiwan Navigation Co on December 4, 2024 and sell it today you would earn a total of  360.00  from holding Taiwan Navigation Co or generate 12.54% return on investment over 90 days.

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

SanDi Properties Co  vs.  Taiwan Navigation Co

SanDi Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days SanDi Properties Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SanDi Properties is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Navigation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Navigation Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Navigation 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 SanDi Properties and Taiwan Navigation

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

The idea behind SanDi Properties Co and Taiwan Navigation 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.