Correlation Between Taiwan Surface and Chia Chang

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

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

Diversification Opportunities for Taiwan Surface and Chia Chang

0.71

Correlation Coefficient

Taiwan Surface  Chia Chang

Poor diversification

The 3 months correlation between Taiwan and Chia is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Surface Mounting and Chia Chang Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Chang and Taiwan Surface 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 Surface Mounting are associated (or correlated) with Chia Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Chang has no effect on the direction of Taiwan Surface i.e., Taiwan Surface and Chia Chang go up and down completely randomly.

Pair Corralation between Taiwan Surface and Chia Chang

Assuming the 90 days trading horizon Taiwan Surface Mounting is expected to generate 1.33 times more return on investment than Chia Chang. However, Taiwan Surface is 1.33 times more volatile than Chia Chang Co. It trades about -0.03 of its potential returns per unit of risk. Chia Chang Co is currently generating about -0.06 per unit of risk. If you would invest  10,850  in Taiwan Surface Mounting on September 13, 2024 and sell it today you would lose (350.00) from holding Taiwan Surface Mounting or give up 3.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Taiwan Surface Mounting  vs.  Chia Chang Co

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.

Chia Chang

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Taiwan Surface Mounting and Chia Chang Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.