Correlation Between Taiwan Business and China Bills
Can any of the company-specific risk be diversified away by investing in both Taiwan Business and China Bills 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 Business and China Bills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Business Bank and China Bills Finance, you can compare the effects of market volatilities on Taiwan Business and China Bills 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 Business with a short position of China Bills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Business and China Bills.
Diversification Opportunities for Taiwan Business and China Bills
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Taiwan and China is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Business Bank and China Bills Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Bills Finance and Taiwan Business 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 Business Bank are associated (or correlated) with China Bills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Bills Finance has no effect on the direction of Taiwan Business i.e., Taiwan Business and China Bills go up and down completely randomly.
Pair Corralation between Taiwan Business and China Bills
Assuming the 90 days trading horizon Taiwan Business Bank is expected to under-perform the China Bills. In addition to that, Taiwan Business is 2.73 times more volatile than China Bills Finance. It trades about -0.03 of its total potential returns per unit of risk. China Bills Finance is currently generating about 0.14 per unit of volatility. If you would invest 1,505 in China Bills Finance on September 19, 2024 and sell it today you would earn a total of 20.00 from holding China Bills Finance or generate 1.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.65% |
Values | Daily Returns |
Taiwan Business Bank vs. China Bills Finance
Performance |
Timeline |
Taiwan Business Bank |
China Bills Finance |
Taiwan Business and China Bills Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Taiwan Business and China Bills
The main advantage of trading using opposite Taiwan Business and China Bills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Business position performs unexpectedly, China Bills 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 China Bills will offset losses from the drop in China Bills' long position.Taiwan Business vs. Central Reinsurance Corp | Taiwan Business vs. Huaku Development Co | Taiwan Business vs. Fubon Financial Holding | Taiwan Business vs. Chailease Holding Co |
China Bills vs. Chang Hwa Commercial | China Bills vs. IBF Financial Holdings | China Bills vs. Taiwan Business Bank | China Bills vs. Yuanta Financial Holdings |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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