Correlation Between Taichung Commercial and Tainet Communication

Can any of the company-specific risk be diversified away by investing in both Taichung Commercial and Tainet Communication 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 Taichung Commercial and Tainet Communication into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Taichung Commercial Bank and Tainet Communication System, you can compare the effects of market volatilities on Taichung Commercial and Tainet Communication 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 Taichung Commercial with a short position of Tainet Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taichung Commercial and Tainet Communication.

Diversification Opportunities for Taichung Commercial and Tainet Communication

-0.67

Correlation Coefficient

Taichung Commercial  Tainet Communication

Excellent diversification

The 3 months correlation between Taichung and Tainet is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Taichung Commercial Bank and Tainet Communication System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainet Communication and Taichung Commercial 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 Taichung Commercial Bank are associated (or correlated) with Tainet Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainet Communication has no effect on the direction of Taichung Commercial i.e., Taichung Commercial and Tainet Communication go up and down completely randomly.

Pair Corralation between Taichung Commercial and Tainet Communication

Assuming the 90 days trading horizon Taichung Commercial Bank is expected to generate 0.4 times more return on investment than Tainet Communication. However, Taichung Commercial Bank is 2.48 times less risky than Tainet Communication. It trades about 0.08 of its potential returns per unit of risk. Tainet Communication System is currently generating about -0.09 per unit of risk. If you would invest  1,795  in Taichung Commercial Bank on October 23, 2024 and sell it today you would earn a total of  80.00  from holding Taichung Commercial Bank or generate 4.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Taichung Commercial Bank  vs.  Tainet Communication System

Taichung Commercial Bank

Risk-Adjusted Performance

0 of 100

Modest

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

Tainet Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tainet Communication System 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 Taichung Commercial and Tainet Communication

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

The idea behind Taichung Commercial Bank and Tainet Communication System 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.