Correlation Between Taiwan Speciality and EirGenix

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

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

Diversification Opportunities for Taiwan Speciality and EirGenix

-0.09

Correlation Coefficient

Taiwan Speciality  EirGenix

Good diversification

The 3 months correlation between Taiwan and EirGenix is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Speciality Chemicals and EirGenix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EirGenix and Taiwan Speciality 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 Speciality Chemicals are associated (or correlated) with EirGenix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EirGenix has no effect on the direction of Taiwan Speciality i.e., Taiwan Speciality and EirGenix go up and down completely randomly.

Pair Corralation between Taiwan Speciality and EirGenix

Assuming the 90 days trading horizon Taiwan Speciality Chemicals is expected to generate 0.54 times more return on investment than EirGenix. However, Taiwan Speciality Chemicals is 1.87 times less risky than EirGenix. It trades about 0.22 of its potential returns per unit of risk. EirGenix is currently generating about -0.26 per unit of risk. If you would invest  16,600  in Taiwan Speciality Chemicals on October 9, 2024 and sell it today you would earn a total of  1,500  from holding Taiwan Speciality Chemicals or generate 9.04% return on investment over 90 days.

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

Taiwan Speciality Chemicals  vs.  EirGenix

Taiwan Speciality

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Speciality Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Speciality is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

EirGenix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EirGenix 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 Taiwan Speciality and EirGenix

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

The idea behind Taiwan Speciality Chemicals and EirGenix 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.