Correlation Between Taiwan Navigation and Klingon Aerospace

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

Diversification Opportunities for Taiwan Navigation and Klingon Aerospace

0.89

Correlation Coefficient

Taiwan Navigation  Klingon Aerospace

Very poor diversification

The 3 months correlation between Taiwan and Klingon is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Klingon Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klingon Aerospace 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 Klingon Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klingon Aerospace has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Klingon Aerospace go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Klingon Aerospace

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 0.61 times more return on investment than Klingon Aerospace. However, Taiwan Navigation Co is 1.63 times less risky than Klingon Aerospace. It trades about -0.02 of its potential returns per unit of risk. Klingon Aerospace is currently generating about -0.04 per unit of risk. If you would invest  3,570  in Taiwan Navigation Co on December 4, 2024 and sell it today you would lose (340.00) from holding Taiwan Navigation Co or give up 9.52% of portfolio value over 90 days.

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

Taiwan Navigation Co  vs.  Klingon Aerospace

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.

Klingon Aerospace

Risk-Adjusted Performance

Very Weak

Over the last 90 days Klingon Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Klingon Aerospace 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 Klingon Aerospace

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

The idea behind Taiwan Navigation Co and Klingon Aerospace 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.