Correlation Between Taiwan Steel and Hi Clearance

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

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

Diversification Opportunities for Taiwan Steel and Hi Clearance

0.03

Correlation Coefficient

Taiwan Steel  Hi Clearance

Significant diversification

The 3 months correlation between Taiwan and 1788 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Steel Union and Hi Clearance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Clearance and Taiwan Steel 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 Steel Union are associated (or correlated) with Hi Clearance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Clearance has no effect on the direction of Taiwan Steel i.e., Taiwan Steel and Hi Clearance go up and down completely randomly.

Pair Corralation between Taiwan Steel and Hi Clearance

Assuming the 90 days trading horizon Taiwan Steel Union is expected to generate 3.63 times more return on investment than Hi Clearance. However, Taiwan Steel is 3.63 times more volatile than Hi Clearance. It trades about 0.07 of its potential returns per unit of risk. Hi Clearance is currently generating about 0.17 per unit of risk. If you would invest  11,500  in Taiwan Steel Union on December 21, 2024 and sell it today you would earn a total of  600.00  from holding Taiwan Steel Union or generate 5.22% return on investment over 90 days.

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

Taiwan Steel Union  vs.  Hi Clearance

Taiwan Steel Union

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Steel Union are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hi Clearance

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hi Clearance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hi Clearance 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 Steel and Hi Clearance

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

The idea behind Taiwan Steel Union and Hi Clearance 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.