Correlation Between Abnova Taiwan and TaiMed Biologics

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

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

Diversification Opportunities for Abnova Taiwan and TaiMed Biologics

0.04

Correlation Coefficient

Abnova Taiwan  TaiMed Biologics

Significant diversification

The 3 months correlation between Abnova and TaiMed is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Abnova Taiwan Corp and TaiMed Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TaiMed Biologics and Abnova Taiwan 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 Abnova Taiwan Corp are associated (or correlated) with TaiMed Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TaiMed Biologics has no effect on the direction of Abnova Taiwan i.e., Abnova Taiwan and TaiMed Biologics go up and down completely randomly.

Pair Corralation between Abnova Taiwan and TaiMed Biologics

Assuming the 90 days trading horizon Abnova Taiwan Corp is expected to under-perform the TaiMed Biologics. But the stock apears to be less risky and, when comparing its historical volatility, Abnova Taiwan Corp is 1.94 times less risky than TaiMed Biologics. The stock trades about -0.02 of its potential returns per unit of risk. The TaiMed Biologics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,690  in TaiMed Biologics on October 12, 2024 and sell it today you would earn a total of  2,360  from holding TaiMed Biologics or generate 35.28% return on investment over 90 days.

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

Abnova Taiwan Corp  vs.  TaiMed Biologics

Abnova Taiwan Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Abnova Taiwan Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Abnova Taiwan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TaiMed Biologics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TaiMed Biologics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TaiMed Biologics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Abnova Taiwan and TaiMed Biologics

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

The idea behind Abnova Taiwan Corp and TaiMed Biologics 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.