Correlation Between Taiwan Navigation and United Integrated

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

Diversification Opportunities for Taiwan Navigation and United Integrated

-0.77

Correlation Coefficient

Taiwan Navigation  United Integrated

Pay attention - limited upside

The 3 months correlation between Taiwan and United is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and United Integrated Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Integrated 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 United Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Integrated has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and United Integrated go up and down completely randomly.

Pair Corralation between Taiwan Navigation and United Integrated

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to under-perform the United Integrated. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Navigation Co is 2.26 times less risky than United Integrated. The stock trades about -0.26 of its potential returns per unit of risk. The United Integrated Services is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  41,200  in United Integrated Services on October 22, 2024 and sell it today you would earn a total of  10,300  from holding United Integrated Services or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Taiwan Navigation Co  vs.  United Integrated Services

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.

United Integrated

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Integrated Services are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, United Integrated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Navigation and United Integrated

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

The idea behind Taiwan Navigation Co and United Integrated Services 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.