Correlation Between Taiwan High and Eva Airways

Can any of the company-specific risk be diversified away by investing in both Taiwan High and Eva Airways 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 High and Eva Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Taiwan High Speed and Eva Airways Corp, you can compare the effects of market volatilities on Taiwan High and Eva Airways 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 High with a short position of Eva Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan High and Eva Airways.

Diversification Opportunities for Taiwan High and Eva Airways

-0.83

Correlation Coefficient

Taiwan High  Eva Airways

Pay attention - limited upside

The 3 months correlation between Taiwan and Eva is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan High Speed and Eva Airways Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eva Airways Corp and Taiwan High 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 High Speed are associated (or correlated) with Eva Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eva Airways Corp has no effect on the direction of Taiwan High i.e., Taiwan High and Eva Airways go up and down completely randomly.

Pair Corralation between Taiwan High and Eva Airways

Assuming the 90 days trading horizon Taiwan High Speed is expected to under-perform the Eva Airways. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan High Speed is 2.98 times less risky than Eva Airways. The stock trades about -0.15 of its potential returns per unit of risk. The Eva Airways Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,590  in Eva Airways Corp on September 16, 2024 and sell it today you would earn a total of  845.00  from holding Eva Airways Corp or generate 23.54% return on investment over 90 days.

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

Taiwan High Speed  vs.  Eva Airways Corp

Taiwan High Speed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan High Speed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan High is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Eva Airways Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eva Airways Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eva Airways showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan High and Eva Airways

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

The idea behind Taiwan High Speed and Eva Airways Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..