Correlation Between Taiwan Union and Global Brands

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

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

Diversification Opportunities for Taiwan Union and Global Brands

0.0

Correlation Coefficient

Taiwan Union  Global Brands

Pay attention - limited upside

The 3 months correlation between Taiwan and Global is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Union Technology and Global Brands Manufacture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Brands Manufacture and Taiwan 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 Taiwan Union Technology are associated (or correlated) with Global Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Brands Manufacture has no effect on the direction of Taiwan Union i.e., Taiwan Union and Global Brands go up and down completely randomly.

Pair Corralation between Taiwan Union and Global Brands

Assuming the 90 days trading horizon Taiwan Union is expected to generate 11.89 times less return on investment than Global Brands. But when comparing it to its historical volatility, Taiwan Union Technology is 1.49 times less risky than Global Brands. It trades about 0.01 of its potential returns per unit of risk. Global Brands Manufacture is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,980  in Global Brands Manufacture on December 30, 2024 and sell it today you would earn a total of  950.00  from holding Global Brands Manufacture or generate 15.89% return on investment over 90 days.

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

Taiwan Union Technology  vs.  Global Brands Manufacture

Taiwan Union Technology

Risk-Adjusted Performance

Very Weak

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

Global Brands Manufacture

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Brands Manufacture are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Global Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Union and Global Brands

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

The idea behind Taiwan Union Technology and Global Brands Manufacture 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.