Correlation Between Taiwan Chelic and Hota Industrial

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

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

Diversification Opportunities for Taiwan Chelic and Hota Industrial

0.71

Correlation Coefficient

Taiwan Chelic  Hota Industrial

Poor diversification

The 3 months correlation between Taiwan and Hota is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Chelic Corp and Hota Industrial Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hota Industrial Mfg and Taiwan Chelic 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 Chelic Corp are associated (or correlated) with Hota Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hota Industrial Mfg has no effect on the direction of Taiwan Chelic i.e., Taiwan Chelic and Hota Industrial go up and down completely randomly.

Pair Corralation between Taiwan Chelic and Hota Industrial

Assuming the 90 days trading horizon Taiwan Chelic is expected to generate 1.14 times less return on investment than Hota Industrial. In addition to that, Taiwan Chelic is 1.02 times more volatile than Hota Industrial Mfg. It trades about 0.07 of its total potential returns per unit of risk. Hota Industrial Mfg is currently generating about 0.08 per unit of volatility. If you would invest  6,390  in Hota Industrial Mfg on December 20, 2024 and sell it today you would earn a total of  840.00  from holding Hota Industrial Mfg or generate 13.15% return on investment over 90 days.

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

Taiwan Chelic Corp  vs.  Hota Industrial Mfg

Taiwan Chelic Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Chelic Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Chelic showed solid returns over the last few months and may actually be approaching a breakup point.

Hota Industrial Mfg

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hota Industrial Mfg are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hota Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Chelic and Hota Industrial

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

The idea behind Taiwan Chelic Corp and Hota Industrial Mfg 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.