Correlation Between Accton Technology and Taiwan Cement

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

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

Diversification Opportunities for Accton Technology and Taiwan Cement

-0.79

Correlation Coefficient

Accton Technology  Taiwan Cement

Pay attention - limited upside

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

Pair Corralation between Accton Technology and Taiwan Cement

Assuming the 90 days trading horizon Accton Technology Corp is expected to generate 18.35 times more return on investment than Taiwan Cement. However, Accton Technology is 18.35 times more volatile than Taiwan Cement Corp. It trades about 0.26 of its potential returns per unit of risk. Taiwan Cement Corp is currently generating about -0.09 per unit of risk. If you would invest  57,300  in Accton Technology Corp on September 27, 2024 and sell it today you would earn a total of  18,100  from holding Accton Technology Corp or generate 31.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Accton Technology Corp  vs.  Taiwan Cement Corp

Accton Technology Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Accton Technology Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Accton Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Taiwan Cement Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Cement Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Taiwan Cement is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Accton Technology and Taiwan Cement

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

The idea behind Accton Technology Corp and Taiwan Cement 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.