Correlation Between Chailease Holding and Taiwan Steel

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

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

Diversification Opportunities for Chailease Holding and Taiwan Steel

0.15

Correlation Coefficient

Chailease Holding  Taiwan Steel

Average diversification

The 3 months correlation between Chailease and Taiwan is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chailease Holding Co and Taiwan Steel Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Steel Union and Chailease Holding 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 Chailease Holding Co are associated (or correlated) with Taiwan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Steel Union has no effect on the direction of Chailease Holding i.e., Chailease Holding and Taiwan Steel go up and down completely randomly.

Pair Corralation between Chailease Holding and Taiwan Steel

Assuming the 90 days trading horizon Chailease Holding Co is expected to under-perform the Taiwan Steel. In addition to that, Chailease Holding is 1.11 times more volatile than Taiwan Steel Union. It trades about -0.09 of its total potential returns per unit of risk. Taiwan Steel Union is currently generating about 0.12 per unit of volatility. If you would invest  10,500  in Taiwan Steel Union on September 13, 2024 and sell it today you would earn a total of  1,650  from holding Taiwan Steel Union or generate 15.71% return on investment over 90 days.

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

Chailease Holding Co  vs.  Taiwan Steel Union

Chailease Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chailease Holding Co 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Taiwan Steel Union

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Steel Union are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Steel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chailease Holding and Taiwan Steel

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

The idea behind Chailease Holding Co and Taiwan Steel Union 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.