Correlation Between Eternal Materials and Taiwan Hopax

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

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

Diversification Opportunities for Eternal Materials and Taiwan Hopax

-0.06

Correlation Coefficient

Eternal Materials  Taiwan Hopax

Good diversification

The 3 months correlation between Eternal and Taiwan is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Materials Co and Taiwan Hopax Chemsistry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hopax Chemsistry and Eternal Materials 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 Eternal Materials Co are associated (or correlated) with Taiwan Hopax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hopax Chemsistry has no effect on the direction of Eternal Materials i.e., Eternal Materials and Taiwan Hopax go up and down completely randomly.

Pair Corralation between Eternal Materials and Taiwan Hopax

Assuming the 90 days trading horizon Eternal Materials Co is expected to under-perform the Taiwan Hopax. But the stock apears to be less risky and, when comparing its historical volatility, Eternal Materials Co is 1.16 times less risky than Taiwan Hopax. The stock trades about -0.37 of its potential returns per unit of risk. The Taiwan Hopax Chemsistry is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  4,175  in Taiwan Hopax Chemsistry on September 22, 2024 and sell it today you would lose (340.00) from holding Taiwan Hopax Chemsistry or give up 8.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.78%
Values	Daily Returns

Eternal Materials Co  vs.  Taiwan Hopax Chemsistry

Eternal Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eternal Materials Co 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.

Taiwan Hopax Chemsistry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Hopax Chemsistry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Hopax 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 Eternal Materials and Taiwan Hopax

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

The idea behind Eternal Materials Co and Taiwan Hopax Chemsistry 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.