Correlation Between Flytech Technology and ABC Taiwan

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

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

Diversification Opportunities for Flytech Technology and ABC Taiwan

-0.4

Correlation Coefficient

Flytech Technology  ABC Taiwan

Very good diversification

The 3 months correlation between Flytech and ABC is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Flytech Technology Co and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics and Flytech Technology 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 Flytech Technology Co are associated (or correlated) with ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of Flytech Technology i.e., Flytech Technology and ABC Taiwan go up and down completely randomly.

Pair Corralation between Flytech Technology and ABC Taiwan

Assuming the 90 days trading horizon Flytech Technology Co is expected to under-perform the ABC Taiwan. In addition to that, Flytech Technology is 1.0 times more volatile than ABC Taiwan Electronics. It trades about -0.04 of its total potential returns per unit of risk. ABC Taiwan Electronics is currently generating about -0.03 per unit of volatility. If you would invest  2,230  in ABC Taiwan Electronics on September 23, 2024 and sell it today you would lose (190.00) from holding ABC Taiwan Electronics or give up 8.52% of portfolio value over 90 days.

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

Flytech Technology Co  vs.  ABC Taiwan Electronics

Flytech Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

ABC Taiwan Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABC Taiwan Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ABC Taiwan 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 Flytech Technology and ABC Taiwan

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

The idea behind Flytech Technology Co and ABC Taiwan Electronics 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.