Correlation Between Eternal Materials and Taiwan Secom

Can any of the company-specific risk be diversified away by investing in both Eternal Materials 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 Eternal Materials and Taiwan Secom 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 Secom Co, you can compare the effects of market volatilities on Eternal Materials 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 Eternal Materials with a short position of Taiwan Secom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eternal Materials and Taiwan Secom.

Diversification Opportunities for Eternal Materials and Taiwan Secom

0.64

Correlation Coefficient

Eternal Materials  Taiwan Secom

Poor diversification

The 3 months correlation between Eternal and Taiwan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Materials Co and Taiwan Secom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Secom 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 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 Eternal Materials i.e., Eternal Materials and Taiwan Secom go up and down completely randomly.

Pair Corralation between Eternal Materials and Taiwan Secom

Assuming the 90 days trading horizon Eternal Materials Co is expected to under-perform the Taiwan Secom. But the stock apears to be less risky and, when comparing its historical volatility, Eternal Materials Co is 1.05 times less risky than Taiwan Secom. The stock trades about -0.02 of its potential returns per unit of risk. The Taiwan Secom Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,970  in Taiwan Secom Co on October 7, 2024 and sell it today you would earn a total of  2,480  from holding Taiwan Secom Co or generate 24.87% return on investment over 90 days.

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

Eternal Materials Co  vs.  Taiwan Secom Co

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 February 2025. The latest fuss may also be a sign of long-term up-swing 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 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.

Pair Trading with Eternal Materials and Taiwan Secom

The main advantage of trading using opposite Eternal Materials and Taiwan Secom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eternal Materials 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 Eternal Materials Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.