Correlation Between Honmyue Enterprise and Taiwan Taffeta

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

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

Diversification Opportunities for Honmyue Enterprise and Taiwan Taffeta

-0.39

Correlation Coefficient

Honmyue Enterprise  Taiwan Taffeta

Very good diversification

The 3 months correlation between Honmyue and Taiwan is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Honmyue Enterprise Co and Taiwan Taffeta Fabric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Taffeta Fabric and Honmyue Enterprise 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 Honmyue Enterprise Co are associated (or correlated) with Taiwan Taffeta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Taffeta Fabric has no effect on the direction of Honmyue Enterprise i.e., Honmyue Enterprise and Taiwan Taffeta go up and down completely randomly.

Pair Corralation between Honmyue Enterprise and Taiwan Taffeta

Assuming the 90 days trading horizon Honmyue Enterprise Co is expected to under-perform the Taiwan Taffeta. In addition to that, Honmyue Enterprise is 1.34 times more volatile than Taiwan Taffeta Fabric. It trades about -0.26 of its total potential returns per unit of risk. Taiwan Taffeta Fabric is currently generating about -0.19 per unit of volatility. If you would invest  1,620  in Taiwan Taffeta Fabric on September 16, 2024 and sell it today you would lose (50.00) from holding Taiwan Taffeta Fabric or give up 3.09% of portfolio value over 90 days.

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

Honmyue Enterprise Co  vs.  Taiwan Taffeta Fabric

Honmyue Enterprise

Risk-Adjusted Performance

2 of 100

Weak

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

Taiwan Taffeta Fabric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Taffeta Fabric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Honmyue Enterprise and Taiwan Taffeta

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

The idea behind Honmyue Enterprise Co and Taiwan Taffeta Fabric 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.