Correlation Between Taiwan Steel and King Chou

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Can any of the company-specific risk be diversified away by investing in both Taiwan Steel and King Chou 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 King Chou 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 King Chou Marine, you can compare the effects of market volatilities on Taiwan Steel and King Chou 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 King Chou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Steel and King Chou.

Diversification Opportunities for Taiwan Steel and King Chou

TaiwanKingDiversified AwayTaiwanKingDiversified Away100%
-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Taiwan and King is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Steel Union and King Chou Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Chou Marine 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 King Chou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Chou Marine has no effect on the direction of Taiwan Steel i.e., Taiwan Steel and King Chou go up and down completely randomly.

Pair Corralation between Taiwan Steel and King Chou

Assuming the 90 days trading horizon Taiwan Steel Union is expected to under-perform the King Chou. In addition to that, Taiwan Steel is 1.88 times more volatile than King Chou Marine. It trades about -0.02 of its total potential returns per unit of risk. King Chou Marine is currently generating about 0.26 per unit of volatility. If you would invest  3,965  in King Chou Marine on November 22, 2024 and sell it today you would earn a total of  450.00  from holding King Chou Marine or generate 11.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Taiwan Steel Union  vs.  King Chou Marine

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 051015
JavaScript chart by amCharts 3.21.156581 4417
       Timeline  
Taiwan Steel Union 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Taiwan Steel Union has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Steel is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb105110115120
King Chou Marine 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in King Chou Marine are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, King Chou may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb394041424344

Taiwan Steel and King Chou Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.27-1.71-1.15-0.59-0.04730.481.041.62.16 0.10.20.30.40.50.60.7
JavaScript chart by amCharts 3.21.156581 4417
       Returns  

Pair Trading with Taiwan Steel and King Chou

The main advantage of trading using opposite Taiwan Steel and King Chou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Steel position performs unexpectedly, King Chou 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 King Chou will offset losses from the drop in King Chou's long position.
The idea behind Taiwan Steel Union and King Chou Marine 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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