Correlation Between Taiwan Sanyo and Coretronic

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

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

Diversification Opportunities for Taiwan Sanyo and Coretronic

-0.35

Correlation Coefficient

Taiwan Sanyo  Coretronic

Very good diversification

The 3 months correlation between Taiwan and Coretronic is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Sanyo Electric and Coretronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coretronic and Taiwan Sanyo 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 Taiwan Sanyo Electric are associated (or correlated) with Coretronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coretronic has no effect on the direction of Taiwan Sanyo i.e., Taiwan Sanyo and Coretronic go up and down completely randomly.

Pair Corralation between Taiwan Sanyo and Coretronic

Assuming the 90 days trading horizon Taiwan Sanyo is expected to generate 7.7 times less return on investment than Coretronic. But when comparing it to its historical volatility, Taiwan Sanyo Electric is 2.34 times less risky than Coretronic. It trades about 0.02 of its potential returns per unit of risk. Coretronic is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,265  in Coretronic on September 26, 2024 and sell it today you would earn a total of  3,655  from holding Coretronic or generate 69.42% return on investment over 90 days.

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

Taiwan Sanyo Electric  vs.  Coretronic

Taiwan Sanyo Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Sanyo Electric 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.

Coretronic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coretronic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Coretronic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Sanyo and Coretronic

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

The idea behind Taiwan Sanyo Electric and Coretronic 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.