Correlation Between Taiwan Navigation and Awea Mechantronic

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

Diversification Opportunities for Taiwan Navigation and Awea Mechantronic

0.72

Correlation Coefficient

Taiwan Navigation  Awea Mechantronic

Poor diversification

The 3 months correlation between Taiwan and Awea is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Awea Mechantronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awea Mechantronic 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 Awea Mechantronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awea Mechantronic has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Awea Mechantronic go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Awea Mechantronic

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 1.15 times more return on investment than Awea Mechantronic. However, Taiwan Navigation is 1.15 times more volatile than Awea Mechantronic Co. It trades about 0.47 of its potential returns per unit of risk. Awea Mechantronic Co is currently generating about 0.33 per unit of risk. If you would invest  2,870  in Taiwan Navigation Co on December 4, 2024 and sell it today you would earn a total of  360.00  from holding Taiwan Navigation Co or generate 12.54% return on investment over 90 days.

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

Taiwan Navigation Co  vs.  Awea Mechantronic 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.

Awea Mechantronic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Awea Mechantronic Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Awea Mechantronic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Taiwan Navigation and Awea Mechantronic

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

The idea behind Taiwan Navigation Co and Awea Mechantronic 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.