Correlation Between Ton Yi and Bank of Kaohsiung

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

By analyzing existing cross correlation between Ton Yi Industrial and Bank of Kaohsiung, you can compare the effects of market volatilities on Ton Yi and Bank of Kaohsiung 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 Ton Yi with a short position of Bank of Kaohsiung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ton Yi and Bank of Kaohsiung.

Diversification Opportunities for Ton Yi and Bank of Kaohsiung

0.7

Correlation Coefficient

Ton Yi  Bank of Kaohsiung

Poor diversification

The 3 months correlation between Ton and Bank is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ton Yi Industrial and Bank of Kaohsiung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Kaohsiung and Ton Yi 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 Ton Yi Industrial are associated (or correlated) with Bank of Kaohsiung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Kaohsiung has no effect on the direction of Ton Yi i.e., Ton Yi and Bank of Kaohsiung go up and down completely randomly.

Pair Corralation between Ton Yi and Bank of Kaohsiung

Assuming the 90 days trading horizon Ton Yi Industrial is expected to under-perform the Bank of Kaohsiung. In addition to that, Ton Yi is 1.81 times more volatile than Bank of Kaohsiung. It trades about -0.17 of its total potential returns per unit of risk. Bank of Kaohsiung is currently generating about -0.06 per unit of volatility. If you would invest  1,165  in Bank of Kaohsiung on October 7, 2024 and sell it today you would lose (20.00) from holding Bank of Kaohsiung or give up 1.72% of portfolio value over 90 days.

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

Ton Yi Industrial  vs.  Bank of Kaohsiung

Ton Yi Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ton Yi Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Bank of Kaohsiung

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Kaohsiung has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Bank of Kaohsiung 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 Ton Yi and Bank of Kaohsiung

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

The idea behind Ton Yi Industrial and Bank of Kaohsiung 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 CEOs Directory module to screen CEOs from public companies around the world.