Correlation Between Taiwan Mask and Innolux Corp

Can any of the company-specific risk be diversified away by investing in both Taiwan Mask and Innolux Corp 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 Innolux Corp 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 Innolux Corp, you can compare the effects of market volatilities on Taiwan Mask and Innolux Corp 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 Innolux Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Mask and Innolux Corp.

Diversification Opportunities for Taiwan Mask and Innolux Corp

0.79

Correlation Coefficient

Taiwan Mask  Innolux Corp

Poor diversification

The 3 months correlation between Taiwan and Innolux is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Mask Corp and Innolux Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innolux Corp 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 Innolux Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innolux Corp has no effect on the direction of Taiwan Mask i.e., Taiwan Mask and Innolux Corp go up and down completely randomly.

Pair Corralation between Taiwan Mask and Innolux Corp

Assuming the 90 days trading horizon Taiwan Mask Corp is expected to under-perform the Innolux Corp. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Mask Corp is 1.14 times less risky than Innolux Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Innolux Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,120  in Innolux Corp on October 7, 2024 and sell it today you would earn a total of  275.00  from holding Innolux Corp or generate 24.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Taiwan Mask Corp  vs.  Innolux Corp

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 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.

Innolux Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innolux Corp 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.

Pair Trading with Taiwan Mask and Innolux Corp

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

The idea behind Taiwan Mask Corp and Innolux Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.