Correlation Between Taiwan Navigation and Hsin Ba

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

Diversification Opportunities for Taiwan Navigation and Hsin Ba

-0.18

Correlation Coefficient

Taiwan Navigation  Hsin Ba

Good diversification

The 3 months correlation between Taiwan and Hsin is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Hsin Ba Ba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Ba Ba 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 Hsin Ba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Ba Ba has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Hsin Ba go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Hsin Ba

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 0.37 times more return on investment than Hsin Ba. However, Taiwan Navigation Co is 2.67 times less risky than Hsin Ba. It trades about -0.03 of its potential returns per unit of risk. Hsin Ba Ba is currently generating about -0.16 per unit of risk. If you would invest  3,095  in Taiwan Navigation Co on September 13, 2024 and sell it today you would lose (85.00) from holding Taiwan Navigation Co or give up 2.75% of portfolio value over 90 days.

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

Taiwan Navigation Co  vs.  Hsin Ba Ba

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 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.

Hsin Ba Ba

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hsin Ba Ba has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Taiwan Navigation and Hsin Ba

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

The idea behind Taiwan Navigation Co and Hsin Ba Ba 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.