Correlation Between SS Healthcare and Taichung Commercial

Can any of the company-specific risk be diversified away by investing in both SS Healthcare and Taichung Commercial 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 SS Healthcare and Taichung Commercial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SS Healthcare Holding and Taichung Commercial Bank, you can compare the effects of market volatilities on SS Healthcare and Taichung Commercial 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 SS Healthcare with a short position of Taichung Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of SS Healthcare and Taichung Commercial.

Diversification Opportunities for SS Healthcare and Taichung Commercial

-0.22

Correlation Coefficient

SS Healthcare  Taichung Commercial

Very good diversification

The 3 months correlation between 4198 and Taichung is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding SS Healthcare Holding and Taichung Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taichung Commercial Bank and SS Healthcare 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 SS Healthcare Holding are associated (or correlated) with Taichung Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taichung Commercial Bank has no effect on the direction of SS Healthcare i.e., SS Healthcare and Taichung Commercial go up and down completely randomly.

Pair Corralation between SS Healthcare and Taichung Commercial

Assuming the 90 days trading horizon SS Healthcare Holding is expected to under-perform the Taichung Commercial. In addition to that, SS Healthcare is 2.32 times more volatile than Taichung Commercial Bank. It trades about -0.02 of its total potential returns per unit of risk. Taichung Commercial Bank is currently generating about 0.29 per unit of volatility. If you would invest  1,865  in Taichung Commercial Bank on December 28, 2024 and sell it today you would earn a total of  290.00  from holding Taichung Commercial Bank or generate 15.55% return on investment over 90 days.

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

SS Healthcare Holding  vs.  Taichung Commercial Bank

SS Healthcare Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days SS Healthcare Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SS Healthcare is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taichung Commercial Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Taichung Commercial Bank are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taichung Commercial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SS Healthcare and Taichung Commercial

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

The idea behind SS Healthcare Holding and Taichung Commercial Bank 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.