Correlation Between Taiwan Navigation and SanDi Properties

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

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

Diversification Opportunities for Taiwan Navigation and SanDi Properties

0.24

Correlation Coefficient

Taiwan Navigation  SanDi Properties

Modest diversification

The 3 months correlation between Taiwan and SanDi is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and SanDi Properties Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SanDi Properties and Taiwan Navigation 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 Navigation Co are associated (or correlated) with SanDi Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SanDi Properties has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and SanDi Properties go up and down completely randomly.

Pair Corralation between Taiwan Navigation and SanDi Properties

Assuming the 90 days trading horizon Taiwan Navigation is expected to generate 13.83 times less return on investment than SanDi Properties. But when comparing it to its historical volatility, Taiwan Navigation Co is 1.49 times less risky than SanDi Properties. It trades about 0.01 of its potential returns per unit of risk. SanDi Properties Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,170  in SanDi Properties Co on December 4, 2024 and sell it today you would earn a total of  2,240  from holding SanDi Properties Co or generate 70.66% return on investment over 90 days.

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

Taiwan Navigation Co  vs.  SanDi Properties Co

Taiwan Navigation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Navigation Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Navigation is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SanDi Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days SanDi Properties Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SanDi Properties is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Taiwan Navigation and SanDi Properties

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

The idea behind Taiwan Navigation Co and SanDi Properties 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.