Correlation Between IBF Financial and Taiwan Speciality

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

By analyzing existing cross correlation between IBF Financial Holdings and Taiwan Speciality Chemicals, you can compare the effects of market volatilities on IBF Financial and Taiwan Speciality 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 IBF Financial with a short position of Taiwan Speciality. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBF Financial and Taiwan Speciality.

Diversification Opportunities for IBF Financial and Taiwan Speciality

-0.77

Correlation Coefficient

IBF Financial  Taiwan Speciality

Pay attention - limited upside

The 3 months correlation between IBF and Taiwan is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding IBF Financial Holdings and Taiwan Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Speciality and IBF Financial 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 IBF Financial Holdings are associated (or correlated) with Taiwan Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Speciality has no effect on the direction of IBF Financial i.e., IBF Financial and Taiwan Speciality go up and down completely randomly.

Pair Corralation between IBF Financial and Taiwan Speciality

Assuming the 90 days trading horizon IBF Financial Holdings is expected to under-perform the Taiwan Speciality. But the stock apears to be less risky and, when comparing its historical volatility, IBF Financial Holdings is 4.24 times less risky than Taiwan Speciality. The stock trades about -0.23 of its potential returns per unit of risk. The Taiwan Speciality Chemicals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  17,500  in Taiwan Speciality Chemicals on December 23, 2024 and sell it today you would earn a total of  7,150  from holding Taiwan Speciality Chemicals or generate 40.86% return on investment over 90 days.

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

IBF Financial Holdings  vs.  Taiwan Speciality Chemicals

IBF Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days IBF Financial Holdings 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Taiwan Speciality

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Speciality Chemicals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Speciality showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IBF Financial and Taiwan Speciality

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

The idea behind IBF Financial Holdings and Taiwan Speciality Chemicals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.