Correlation Between Taiwan Tea and KS Terminals

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

By analyzing existing cross correlation between Taiwan Tea Corp and KS Terminals, you can compare the effects of market volatilities on Taiwan Tea and KS Terminals 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 Tea with a short position of KS Terminals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Tea and KS Terminals.

Diversification Opportunities for Taiwan Tea and KS Terminals

0.74

Correlation Coefficient

Taiwan Tea  KS Terminals

Poor diversification

The 3 months correlation between Taiwan and 3003 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Tea Corp and KS Terminals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KS Terminals and Taiwan Tea 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 Tea Corp are associated (or correlated) with KS Terminals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KS Terminals has no effect on the direction of Taiwan Tea i.e., Taiwan Tea and KS Terminals go up and down completely randomly.

Pair Corralation between Taiwan Tea and KS Terminals

Assuming the 90 days trading horizon Taiwan Tea is expected to generate 8.87 times less return on investment than KS Terminals. In addition to that, Taiwan Tea is 1.01 times more volatile than KS Terminals. It trades about 0.0 of its total potential returns per unit of risk. KS Terminals is currently generating about 0.02 per unit of volatility. If you would invest  7,090  in KS Terminals on September 24, 2024 and sell it today you would earn a total of  650.00  from holding KS Terminals or generate 9.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Taiwan Tea Corp  vs.  KS Terminals

Taiwan Tea Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Tea Corp 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.

KS Terminals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KS Terminals 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Taiwan Tea and KS Terminals

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

The idea behind Taiwan Tea Corp and KS Terminals 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.