Correlation Between Chang Hwa and Taiwan Glass

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

By analyzing existing cross correlation between Chang Hwa Commercial and Taiwan Glass Ind, you can compare the effects of market volatilities on Chang Hwa and Taiwan Glass 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 Chang Hwa with a short position of Taiwan Glass. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chang Hwa and Taiwan Glass.

Diversification Opportunities for Chang Hwa and Taiwan Glass

0.06

Correlation Coefficient

Chang Hwa  Taiwan Glass

Significant diversification

The 3 months correlation between Chang and Taiwan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Chang Hwa Commercial and Taiwan Glass Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Glass Ind and Chang Hwa 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 Chang Hwa Commercial are associated (or correlated) with Taiwan Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Glass Ind has no effect on the direction of Chang Hwa i.e., Chang Hwa and Taiwan Glass go up and down completely randomly.

Pair Corralation between Chang Hwa and Taiwan Glass

Assuming the 90 days trading horizon Chang Hwa is expected to generate 126.69 times less return on investment than Taiwan Glass. But when comparing it to its historical volatility, Chang Hwa Commercial is 5.62 times less risky than Taiwan Glass. It trades about 0.0 of its potential returns per unit of risk. Taiwan Glass Ind is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,965  in Taiwan Glass Ind on September 2, 2024 and sell it today you would earn a total of  55.00  from holding Taiwan Glass Ind or generate 2.8% return on investment over 90 days.

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

Chang Hwa Commercial  vs.  Taiwan Glass Ind

Chang Hwa Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Taiwan Glass Ind

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Glass Ind are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Glass showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chang Hwa and Taiwan Glass

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

The idea behind Chang Hwa Commercial and Taiwan Glass Ind 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.