Correlation Between Top Union and Taiwan Chinsan

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

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

Diversification Opportunities for Top Union and Taiwan Chinsan

0.61

Correlation Coefficient

Top Union  Taiwan Chinsan

Poor diversification

The 3 months correlation between Top and Taiwan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Top Union Electronics and Taiwan Chinsan Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Chinsan Electronic and Top Union 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 Top Union Electronics are associated (or correlated) with Taiwan Chinsan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Chinsan Electronic has no effect on the direction of Top Union i.e., Top Union and Taiwan Chinsan go up and down completely randomly.

Pair Corralation between Top Union and Taiwan Chinsan

Assuming the 90 days trading horizon Top Union Electronics is expected to generate 0.28 times more return on investment than Taiwan Chinsan. However, Top Union Electronics is 3.54 times less risky than Taiwan Chinsan. It trades about 0.67 of its potential returns per unit of risk. Taiwan Chinsan Electronic is currently generating about 0.06 per unit of risk. If you would invest  3,085  in Top Union Electronics on December 4, 2024 and sell it today you would earn a total of  360.00  from holding Top Union Electronics or generate 11.67% return on investment over 90 days.

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

Top Union Electronics  vs.  Taiwan Chinsan Electronic

Top Union Electronics

Risk-Adjusted Performance

Weak

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

Taiwan Chinsan Electronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taiwan Chinsan Electronic 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Top Union and Taiwan Chinsan

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

The idea behind Top Union Electronics and Taiwan Chinsan Electronic 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 Anywhere module to track or share privately all of your investments from the convenience of any device.