Correlation Between Taiwan Navigation and Shih Wei

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

Diversification Opportunities for Taiwan Navigation and Shih Wei

0.92

Correlation Coefficient

Taiwan Navigation  Shih Wei

Almost no diversification

The 3 months correlation between Taiwan and Shih is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Shih Wei Navigation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shih Wei Navigation 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 Shih Wei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shih Wei Navigation has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Shih Wei go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Shih Wei

Assuming the 90 days trading horizon Taiwan Navigation is expected to generate 1.89 times less return on investment than Shih Wei. But when comparing it to its historical volatility, Taiwan Navigation Co is 2.35 times less risky than Shih Wei. It trades about 0.17 of its potential returns per unit of risk. Shih Wei Navigation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,685  in Shih Wei Navigation on December 21, 2024 and sell it today you would earn a total of  335.00  from holding Shih Wei Navigation or generate 19.88% return on investment over 90 days.

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

Taiwan Navigation Co  vs.  Shih Wei Navigation

Taiwan Navigation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Navigation Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Navigation may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shih Wei Navigation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shih Wei Navigation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shih Wei showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Navigation and Shih Wei

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

The idea behind Taiwan Navigation Co and Shih Wei Navigation 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.