Correlation Between Kaulin Mfg and Tainan Enterprises

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

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

Diversification Opportunities for Kaulin Mfg and Tainan Enterprises

-0.55

Correlation Coefficient

Kaulin Mfg  Tainan Enterprises

Excellent diversification

The 3 months correlation between Kaulin and Tainan is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Kaulin Mfg and Tainan Enterprises Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Enterprises and Kaulin Mfg 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 Kaulin Mfg are associated (or correlated) with Tainan Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Enterprises has no effect on the direction of Kaulin Mfg i.e., Kaulin Mfg and Tainan Enterprises go up and down completely randomly.

Pair Corralation between Kaulin Mfg and Tainan Enterprises

Assuming the 90 days trading horizon Kaulin Mfg is expected to generate 1.87 times more return on investment than Tainan Enterprises. However, Kaulin Mfg is 1.87 times more volatile than Tainan Enterprises Co. It trades about 0.04 of its potential returns per unit of risk. Tainan Enterprises Co is currently generating about -0.05 per unit of risk. If you would invest  1,400  in Kaulin Mfg on September 13, 2024 and sell it today you would earn a total of  80.00  from holding Kaulin Mfg or generate 5.71% return on investment over 90 days.

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

Kaulin Mfg  vs.  Tainan Enterprises Co

Kaulin Mfg

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kaulin Mfg are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kaulin Mfg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tainan Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Kaulin Mfg and Tainan Enterprises 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.