Correlation Between Awea Mechantronic and Taiwan Navigation

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

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

Diversification Opportunities for Awea Mechantronic and Taiwan Navigation

0.91

Correlation Coefficient

Awea Mechantronic  Taiwan Navigation

Almost no diversification

The 3 months correlation between Awea and Taiwan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Awea Mechantronic 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 Awea Mechantronic 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 Awea Mechantronic 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 Awea Mechantronic i.e., Awea Mechantronic and Taiwan Navigation go up and down completely randomly.

Pair Corralation between Awea Mechantronic and Taiwan Navigation

Assuming the 90 days trading horizon Awea Mechantronic is expected to generate 55.15 times less return on investment than Taiwan Navigation. But when comparing it to its historical volatility, Awea Mechantronic Co is 1.19 times less risky than Taiwan Navigation. It trades about 0.0 of its potential returns per unit of risk. Taiwan Navigation Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,935  in Taiwan Navigation Co on December 29, 2024 and sell it today you would earn a total of  175.00  from holding Taiwan Navigation Co or generate 5.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.25%
Values	Daily Returns

Awea Mechantronic Co  vs.  Taiwan Navigation Co

Awea Mechantronic

Risk-Adjusted Performance

Very Weak

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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Navigation Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Navigation may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Awea Mechantronic and Taiwan Navigation

The main advantage of trading using opposite Awea Mechantronic and Taiwan Navigation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Awea Mechantronic 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 Awea Mechantronic 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.