Correlation Between Tigerair Taiwan and Advantech

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

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

Diversification Opportunities for Tigerair Taiwan and Advantech

0.6

Correlation Coefficient

Tigerair Taiwan  Advantech

Poor diversification

The 3 months correlation between Tigerair and Advantech is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tigerair Taiwan Co and Advantech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantech and Tigerair Taiwan 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 Tigerair Taiwan Co are associated (or correlated) with Advantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantech has no effect on the direction of Tigerair Taiwan i.e., Tigerair Taiwan and Advantech go up and down completely randomly.

Pair Corralation between Tigerair Taiwan and Advantech

Assuming the 90 days trading horizon Tigerair Taiwan Co is expected to generate 1.18 times more return on investment than Advantech. However, Tigerair Taiwan is 1.18 times more volatile than Advantech Co. It trades about 0.16 of its potential returns per unit of risk. Advantech Co is currently generating about 0.1 per unit of risk. If you would invest  7,990  in Tigerair Taiwan Co on December 25, 2024 and sell it today you would earn a total of  1,890  from holding Tigerair Taiwan Co or generate 23.65% return on investment over 90 days.

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

Tigerair Taiwan Co  vs.  Advantech Co

Tigerair Taiwan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tigerair Taiwan Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tigerair Taiwan showed solid returns over the last few months and may actually be approaching a breakup point.

Advantech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tigerair Taiwan and Advantech

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

The idea behind Tigerair Taiwan Co and Advantech 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.