Correlation Between AV Tech and Taiwan Union

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

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

Diversification Opportunities for AV Tech and Taiwan Union

-0.59

Correlation Coefficient

AV Tech  Taiwan Union

Excellent diversification

The 3 months correlation between 8072 and Taiwan is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding AV Tech Corp and Taiwan Union Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Union Technology and AV Tech 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 AV Tech Corp are associated (or correlated) with Taiwan Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Union Technology has no effect on the direction of AV Tech i.e., AV Tech and Taiwan Union go up and down completely randomly.

Pair Corralation between AV Tech and Taiwan Union

Assuming the 90 days trading horizon AV Tech is expected to generate 44.52 times less return on investment than Taiwan Union. But when comparing it to its historical volatility, AV Tech Corp is 1.94 times less risky than Taiwan Union. It trades about 0.0 of its potential returns per unit of risk. Taiwan Union Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,379  in Taiwan Union Technology on October 4, 2024 and sell it today you would earn a total of  11,621  from holding Taiwan Union Technology or generate 216.04% return on investment over 90 days.

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

AV Tech Corp  vs.  Taiwan Union Technology

AV Tech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AV Tech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Taiwan Union Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Union Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Union 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 AV Tech and Taiwan Union

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

The idea behind AV Tech Corp and Taiwan Union Technology 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.