Correlation Between Global PMX and Ta Liang

Can any of the company-specific risk be diversified away by investing in both Global PMX and Ta Liang 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 Global PMX and Ta Liang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global PMX Co and Ta Liang Technology, you can compare the effects of market volatilities on Global PMX and Ta Liang 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 Global PMX with a short position of Ta Liang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global PMX and Ta Liang.

Diversification Opportunities for Global PMX and Ta Liang

0.8

Correlation Coefficient

Global PMX  Ta Liang

Very poor diversification

The 3 months correlation between Global and 3167 is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Global PMX Co and Ta Liang Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Liang Technology and Global PMX 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 Global PMX Co are associated (or correlated) with Ta Liang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Liang Technology has no effect on the direction of Global PMX i.e., Global PMX and Ta Liang go up and down completely randomly.

Pair Corralation between Global PMX and Ta Liang

Assuming the 90 days trading horizon Global PMX Co is expected to under-perform the Ta Liang. But the stock apears to be less risky and, when comparing its historical volatility, Global PMX Co is 2.38 times less risky than Ta Liang. The stock trades about -0.28 of its potential returns per unit of risk. The Ta Liang Technology is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  10,900  in Ta Liang Technology on October 10, 2024 and sell it today you would lose (250.00) from holding Ta Liang Technology or give up 2.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Global PMX Co  vs.  Ta Liang Technology

Global PMX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global PMX Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ta Liang Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ta Liang Technology 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Global PMX and Ta Liang

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

The idea behind Global PMX Co and Ta Liang Technology 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.