Correlation Between Taiwan Taomee and Asia Metal

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

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

Diversification Opportunities for Taiwan Taomee and Asia Metal

0.16

Correlation Coefficient

Taiwan Taomee  Asia Metal

Average diversification

The 3 months correlation between Taiwan and Asia is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Taomee Co and Asia Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Metal Industries and Taiwan Taomee 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 Taomee Co are associated (or correlated) with Asia Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Metal Industries has no effect on the direction of Taiwan Taomee i.e., Taiwan Taomee and Asia Metal go up and down completely randomly.

Pair Corralation between Taiwan Taomee and Asia Metal

Assuming the 90 days trading horizon Taiwan Taomee Co is expected to generate 0.59 times more return on investment than Asia Metal. However, Taiwan Taomee Co is 1.7 times less risky than Asia Metal. It trades about -0.04 of its potential returns per unit of risk. Asia Metal Industries is currently generating about -0.04 per unit of risk. If you would invest  1,050  in Taiwan Taomee Co on October 22, 2024 and sell it today you would lose (50.00) from holding Taiwan Taomee Co or give up 4.76% of portfolio value over 90 days.

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

Taiwan Taomee Co  vs.  Asia Metal Industries

Taiwan Taomee

Risk-Adjusted Performance

0 of 100

Very Weak

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

Asia Metal Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Metal Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Asia Metal 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 Taomee and Asia Metal

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

The idea behind Taiwan Taomee Co and Asia Metal Industries 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.