Correlation Between Taichung Commercial and Baotek Industrial

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

Diversification Opportunities for Taichung Commercial and Baotek Industrial

-0.06

Correlation Coefficient

Taichung Commercial  Baotek Industrial

Good diversification

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

Pair Corralation between Taichung Commercial and Baotek Industrial

Assuming the 90 days trading horizon Taichung Commercial Bank is expected to generate 0.9 times more return on investment than Baotek Industrial. However, Taichung Commercial Bank is 1.11 times less risky than Baotek Industrial. It trades about -0.18 of its potential returns per unit of risk. Baotek Industrial Materials is currently generating about -0.54 per unit of risk. If you would invest  1,945  in Taichung Commercial Bank on October 10, 2024 and sell it today you would lose (65.00) from holding Taichung Commercial Bank or give up 3.34% of portfolio value over 90 days.

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

Taichung Commercial Bank  vs.  Baotek Industrial Materials

Taichung Commercial Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taichung Commercial Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

Baotek Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baotek Industrial Materials 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Taichung Commercial and Baotek Industrial

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

The idea behind Taichung Commercial Bank and Baotek Industrial Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.