Correlation Between Excellence Optoelectronic and Taiwan Chinsan

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

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

Diversification Opportunities for Excellence Optoelectronic and Taiwan Chinsan

0.13

Correlation Coefficient

Excellence Optoelectronic  Taiwan Chinsan

Average diversification

The 3 months correlation between Excellence and Taiwan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Excellence Optoelectronic 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 Excellence Optoelectronic 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 Excellence Optoelectronic 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 Excellence Optoelectronic i.e., Excellence Optoelectronic and Taiwan Chinsan go up and down completely randomly.

Pair Corralation between Excellence Optoelectronic and Taiwan Chinsan

Assuming the 90 days trading horizon Excellence Optoelectronic is expected to generate 2.84 times less return on investment than Taiwan Chinsan. In addition to that, Excellence Optoelectronic is 1.04 times more volatile than Taiwan Chinsan Electronic. It trades about 0.05 of its total potential returns per unit of risk. Taiwan Chinsan Electronic is currently generating about 0.14 per unit of volatility. If you would invest  3,430  in Taiwan Chinsan Electronic on September 15, 2024 and sell it today you would earn a total of  1,090  from holding Taiwan Chinsan Electronic or generate 31.78% return on investment over 90 days.

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

Excellence Optoelectronic  vs.  Taiwan Chinsan Electronic

Excellence Optoelectronic

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Excellence Optoelectronic are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Excellence Optoelectronic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Taiwan Chinsan Electronic

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Chinsan Electronic are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Chinsan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Excellence Optoelectronic and Taiwan Chinsan

The main advantage of trading using opposite Excellence Optoelectronic and Taiwan Chinsan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Excellence Optoelectronic 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 Excellence Optoelectronic 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.