Correlation Between Tainan Spinning and Acelon Chemicals

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

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

Diversification Opportunities for Tainan Spinning and Acelon Chemicals

0.8

Correlation Coefficient

Tainan Spinning  Acelon Chemicals

Very poor diversification

The 3 months correlation between Tainan and Acelon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Acelon Chemicals Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acelon Chemicals Fiber and Tainan Spinning 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 Tainan Spinning Co are associated (or correlated) with Acelon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acelon Chemicals Fiber has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Acelon Chemicals go up and down completely randomly.

Pair Corralation between Tainan Spinning and Acelon Chemicals

Assuming the 90 days trading horizon Tainan Spinning is expected to generate 1.45 times less return on investment than Acelon Chemicals. But when comparing it to its historical volatility, Tainan Spinning Co is 1.24 times less risky than Acelon Chemicals. It trades about 0.46 of its potential returns per unit of risk. Acelon Chemicals Fiber is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest  1,175  in Acelon Chemicals Fiber on December 4, 2024 and sell it today you would earn a total of  165.00  from holding Acelon Chemicals Fiber or generate 14.04% return on investment over 90 days.

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

Tainan Spinning Co  vs.  Acelon Chemicals Fiber

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.

Acelon Chemicals Fiber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Acelon Chemicals Fiber 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 Tainan Spinning and Acelon Chemicals

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

The idea behind Tainan Spinning Co and Acelon Chemicals Fiber 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.