Correlation Between Taiwan Chinsan and Delta Asia

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

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

Diversification Opportunities for Taiwan Chinsan and Delta Asia

-0.13

Correlation Coefficient

Taiwan Chinsan  Delta Asia

Good diversification

The 3 months correlation between Taiwan and Delta is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Chinsan Electronic and Delta Asia International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Asia International and Taiwan Chinsan 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 Chinsan Electronic are associated (or correlated) with Delta Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Asia International has no effect on the direction of Taiwan Chinsan i.e., Taiwan Chinsan and Delta Asia go up and down completely randomly.

Pair Corralation between Taiwan Chinsan and Delta Asia

Assuming the 90 days trading horizon Taiwan Chinsan Electronic is expected to under-perform the Delta Asia. In addition to that, Taiwan Chinsan is 3.67 times more volatile than Delta Asia International. It trades about -0.02 of its total potential returns per unit of risk. Delta Asia International is currently generating about -0.05 per unit of volatility. If you would invest  27,250  in Delta Asia International on December 30, 2024 and sell it today you would lose (750.00) from holding Delta Asia International or give up 2.75% of portfolio value over 90 days.

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

Taiwan Chinsan Electronic  vs.  Delta Asia International

Taiwan Chinsan Electronic

Risk-Adjusted Performance

Very Weak

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

Delta Asia International

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Taiwan Chinsan Electronic and Delta Asia International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.