Correlation Between Taiwan Navigation and Acbel Polytech

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

Diversification Opportunities for Taiwan Navigation and Acbel Polytech

0.72

Correlation Coefficient

Taiwan Navigation  Acbel Polytech

Poor diversification

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

Pair Corralation between Taiwan Navigation and Acbel Polytech

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 0.59 times more return on investment than Acbel Polytech. However, Taiwan Navigation Co is 1.68 times less risky than Acbel Polytech. It trades about -0.18 of its potential returns per unit of risk. Acbel Polytech is currently generating about -0.31 per unit of risk. If you would invest  3,080  in Taiwan Navigation Co on October 7, 2024 and sell it today you would lose (105.00) from holding Taiwan Navigation Co or give up 3.41% of portfolio value over 90 days.

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

Taiwan Navigation Co  vs.  Acbel Polytech

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.

Acbel Polytech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acbel Polytech 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.

Pair Trading with Taiwan Navigation and Acbel Polytech

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

The idea behind Taiwan Navigation Co and Acbel Polytech 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.