Correlation Between Global Lighting and Taiwan Surface

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

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

Diversification Opportunities for Global Lighting and Taiwan Surface

0.55

Correlation Coefficient

Global Lighting  Taiwan Surface

Very weak diversification

The 3 months correlation between Global and Taiwan is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Global Lighting Technologies and Taiwan Surface Mounting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Surface Mounting and Global Lighting 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 Lighting Technologies are associated (or correlated) with Taiwan Surface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Surface Mounting has no effect on the direction of Global Lighting i.e., Global Lighting and Taiwan Surface go up and down completely randomly.

Pair Corralation between Global Lighting and Taiwan Surface

Assuming the 90 days trading horizon Global Lighting Technologies is expected to under-perform the Taiwan Surface. In addition to that, Global Lighting is 1.23 times more volatile than Taiwan Surface Mounting. It trades about -0.17 of its total potential returns per unit of risk. Taiwan Surface Mounting is currently generating about -0.01 per unit of volatility. If you would invest  11,150  in Taiwan Surface Mounting on October 7, 2024 and sell it today you would lose (200.00) from holding Taiwan Surface Mounting or give up 1.79% of portfolio value over 90 days.

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

Global Lighting Technologies  vs.  Taiwan Surface Mounting

Global Lighting Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Lighting Technologies 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.

Taiwan Surface Mounting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Surface Mounting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Surface 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 Global Lighting and Taiwan Surface

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

The idea behind Global Lighting Technologies and Taiwan Surface Mounting 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.