Correlation Between PChome Online and Taiwan Chinsan

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

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

Diversification Opportunities for PChome Online and Taiwan Chinsan

0.28

Correlation Coefficient

PChome Online  Taiwan Chinsan

Modest diversification

The 3 months correlation between PChome and Taiwan is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding PChome Online and Taiwan Chinsan Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Chinsan Electronic and PChome Online 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 PChome Online are associated (or correlated) with Taiwan Chinsan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Chinsan Electronic has no effect on the direction of PChome Online i.e., PChome Online and Taiwan Chinsan go up and down completely randomly.

Pair Corralation between PChome Online and Taiwan Chinsan

Assuming the 90 days trading horizon PChome Online is expected to under-perform the Taiwan Chinsan. But the stock apears to be less risky and, when comparing its historical volatility, PChome Online is 1.31 times less risky than Taiwan Chinsan. The stock trades about -0.03 of its potential returns per unit of risk. The Taiwan Chinsan Electronic is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,085  in Taiwan Chinsan Electronic on December 29, 2024 and sell it today you would lose (260.00) from holding Taiwan Chinsan Electronic or give up 6.36% of portfolio value over 90 days.

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

PChome Online  vs.  Taiwan Chinsan Electronic

PChome Online

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with PChome Online and Taiwan Chinsan

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

The idea behind PChome Online and Taiwan Chinsan Electronic 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.