Correlation Between Chia Yi and Tigerair Taiwan

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

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

Diversification Opportunities for Chia Yi and Tigerair Taiwan

0.53

Correlation Coefficient

Chia Yi  Tigerair Taiwan

Very weak diversification

The 3 months correlation between Chia and Tigerair is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Chia Yi Steel and Tigerair Taiwan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigerair Taiwan and Chia Yi 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 Chia Yi Steel are associated (or correlated) with Tigerair Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigerair Taiwan has no effect on the direction of Chia Yi i.e., Chia Yi and Tigerair Taiwan go up and down completely randomly.

Pair Corralation between Chia Yi and Tigerair Taiwan

Assuming the 90 days trading horizon Chia Yi is expected to generate 1.33 times less return on investment than Tigerair Taiwan. In addition to that, Chia Yi is 1.3 times more volatile than Tigerair Taiwan Co. It trades about 0.05 of its total potential returns per unit of risk. Tigerair Taiwan Co is currently generating about 0.08 per unit of volatility. If you would invest  6,580  in Tigerair Taiwan Co on September 16, 2024 and sell it today you would earn a total of  900.00  from holding Tigerair Taiwan Co or generate 13.68% return on investment over 90 days.

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

Chia Yi Steel  vs.  Tigerair Taiwan Co

Chia Yi Steel

Risk-Adjusted Performance

3 of 100

Insignificant

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

Tigerair Taiwan

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tigerair Taiwan Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tigerair Taiwan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chia Yi and Tigerair Taiwan

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

The idea behind Chia Yi Steel and Tigerair Taiwan 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.