Correlation Between San Fu and Taiwan Hopax

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

By analyzing existing cross correlation between San Fu Chemical and Taiwan Hopax Chemsistry, you can compare the effects of market volatilities on San Fu and Taiwan Hopax 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 San Fu with a short position of Taiwan Hopax. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Fu and Taiwan Hopax.

Diversification Opportunities for San Fu and Taiwan Hopax

-0.51

Correlation Coefficient

San Fu  Taiwan Hopax

Excellent diversification

The 3 months correlation between San and Taiwan is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding San Fu Chemical and Taiwan Hopax Chemsistry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hopax Chemsistry and San Fu 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 San Fu Chemical are associated (or correlated) with Taiwan Hopax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hopax Chemsistry has no effect on the direction of San Fu i.e., San Fu and Taiwan Hopax go up and down completely randomly.

Pair Corralation between San Fu and Taiwan Hopax

Assuming the 90 days trading horizon San Fu Chemical is expected to under-perform the Taiwan Hopax. In addition to that, San Fu is 2.27 times more volatile than Taiwan Hopax Chemsistry. It trades about -0.01 of its total potential returns per unit of risk. Taiwan Hopax Chemsistry is currently generating about 0.0 per unit of volatility. If you would invest  3,850  in Taiwan Hopax Chemsistry on September 20, 2024 and sell it today you would lose (10.00) from holding Taiwan Hopax Chemsistry or give up 0.26% of portfolio value over 90 days.

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

San Fu Chemical  vs.  Taiwan Hopax Chemsistry

San Fu Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Taiwan Hopax Chemsistry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with San Fu and Taiwan Hopax

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

The idea behind San Fu Chemical and Taiwan Hopax Chemsistry 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.