Correlation Between Taiwan Navigation and Falcon Power

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

Diversification Opportunities for Taiwan Navigation and Falcon Power

0.14

Correlation Coefficient

Taiwan Navigation  Falcon Power

Average diversification

The 3 months correlation between Taiwan and Falcon is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Falcon Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Power 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 Falcon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Power has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Falcon Power go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Falcon Power

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 0.42 times more return on investment than Falcon Power. However, Taiwan Navigation Co is 2.37 times less risky than Falcon Power. It trades about 0.07 of its potential returns per unit of risk. Falcon Power Co is currently generating about -0.12 per unit of risk. If you would invest  2,885  in Taiwan Navigation Co on October 20, 2024 and sell it today you would earn a total of  40.00  from holding Taiwan Navigation Co or generate 1.39% return on investment over 90 days.

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

Taiwan Navigation Co  vs.  Falcon Power Co

Taiwan Navigation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Navigation Co 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.

Falcon Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Power Co 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 Navigation and Falcon Power

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

The idea behind Taiwan Navigation Co and Falcon Power 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 Global Correlations module to find global opportunities by holding instruments from different markets.