Correlation Between BenQ Materials and Taiwan Hon

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

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

Diversification Opportunities for BenQ Materials and Taiwan Hon

-0.53

Correlation Coefficient

BenQ Materials  Taiwan Hon

Excellent diversification

The 3 months correlation between BenQ and Taiwan is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BenQ Materials Corp and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan and BenQ Materials 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 BenQ Materials Corp are associated (or correlated) with Taiwan Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of BenQ Materials i.e., BenQ Materials and Taiwan Hon go up and down completely randomly.

Pair Corralation between BenQ Materials and Taiwan Hon

Assuming the 90 days trading horizon BenQ Materials Corp is expected to under-perform the Taiwan Hon. But the stock apears to be less risky and, when comparing its historical volatility, BenQ Materials Corp is 1.27 times less risky than Taiwan Hon. The stock trades about -0.14 of its potential returns per unit of risk. The Taiwan Hon Chuan is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,900  in Taiwan Hon Chuan on December 27, 2024 and sell it today you would earn a total of  750.00  from holding Taiwan Hon Chuan or generate 5.03% return on investment over 90 days.

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

BenQ Materials Corp  vs.  Taiwan Hon Chuan

BenQ Materials Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days BenQ Materials 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 Hon Chuan

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Hon Chuan are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Hon 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 BenQ Materials and Taiwan Hon

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

The idea behind BenQ Materials Corp and Taiwan Hon Chuan 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.