Correlation Between Taiwan Mask and Pan Jit

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

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

Diversification Opportunities for Taiwan Mask and Pan Jit

0.83

Correlation Coefficient

Taiwan Mask  Pan Jit

Very poor diversification

The 3 months correlation between Taiwan and Pan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Mask Corp and Pan Jit International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Jit International and Taiwan Mask 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 Mask Corp are associated (or correlated) with Pan Jit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Jit International has no effect on the direction of Taiwan Mask i.e., Taiwan Mask and Pan Jit go up and down completely randomly.

Pair Corralation between Taiwan Mask and Pan Jit

Assuming the 90 days trading horizon Taiwan Mask Corp is expected to under-perform the Pan Jit. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Mask Corp is 1.29 times less risky than Pan Jit. The stock trades about -0.09 of its potential returns per unit of risk. The Pan Jit International is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  5,580  in Pan Jit International on September 16, 2024 and sell it today you would lose (490.00) from holding Pan Jit International or give up 8.78% of portfolio value over 90 days.

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

Taiwan Mask Corp  vs.  Pan Jit International

Taiwan Mask Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Mask Corp 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.

Pan Jit International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan Jit International 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 Taiwan Mask and Pan Jit

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

The idea behind Taiwan Mask Corp and Pan Jit International 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.