Correlation Between Zeng Hsing and Taiwan Secom

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

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

Diversification Opportunities for Zeng Hsing and Taiwan Secom

0.57

Correlation Coefficient

Zeng Hsing  Taiwan Secom

Very weak diversification

The 3 months correlation between Zeng and Taiwan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Zeng Hsing Industrial and Taiwan Secom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Secom and Zeng Hsing 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 Zeng Hsing Industrial are associated (or correlated) with Taiwan Secom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Secom has no effect on the direction of Zeng Hsing i.e., Zeng Hsing and Taiwan Secom go up and down completely randomly.

Pair Corralation between Zeng Hsing and Taiwan Secom

Assuming the 90 days trading horizon Zeng Hsing Industrial is expected to under-perform the Taiwan Secom. But the stock apears to be less risky and, when comparing its historical volatility, Zeng Hsing Industrial is 1.21 times less risky than Taiwan Secom. The stock trades about -0.18 of its potential returns per unit of risk. The Taiwan Secom Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  13,800  in Taiwan Secom Co on September 15, 2024 and sell it today you would lose (700.00) from holding Taiwan Secom Co or give up 5.07% of portfolio value over 90 days.

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

Zeng Hsing Industrial  vs.  Taiwan Secom Co

Zeng Hsing Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zeng Hsing Industrial 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.

Taiwan Secom

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Zeng Hsing Industrial and Taiwan Secom 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.