Correlation Between Great Taipei and Taiwan Cement
Can any of the company-specific risk be diversified away by investing in both Great Taipei and Taiwan Cement 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 Great Taipei and Taiwan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Taipei Gas and Taiwan Cement Corp, you can compare the effects of market volatilities on Great Taipei and Taiwan Cement 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 Great Taipei with a short position of Taiwan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Taipei and Taiwan Cement.
Diversification Opportunities for Great Taipei and Taiwan Cement
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Great and Taiwan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Great Taipei Gas and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and Great Taipei 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 Great Taipei Gas are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Great Taipei i.e., Great Taipei and Taiwan Cement go up and down completely randomly.
Pair Corralation between Great Taipei and Taiwan Cement
Assuming the 90 days trading horizon Great Taipei is expected to generate 88.5 times less return on investment than Taiwan Cement. But when comparing it to its historical volatility, Great Taipei Gas is 3.33 times less risky than Taiwan Cement. It trades about 0.0 of its potential returns per unit of risk. Taiwan Cement Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,170 in Taiwan Cement Corp on December 30, 2024 and sell it today you would earn a total of 115.00 from holding Taiwan Cement Corp or generate 3.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Great Taipei Gas vs. Taiwan Cement Corp
Performance |
Timeline |
Great Taipei Gas |
Taiwan Cement Corp |
Great Taipei and Taiwan Cement Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Great Taipei and Taiwan Cement
The main advantage of trading using opposite Great Taipei and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Taipei position performs unexpectedly, Taiwan Cement 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 Cement will offset losses from the drop in Taiwan Cement's long position.Great Taipei vs. Taiwan Secom Co | Great Taipei vs. Taiwan Shin Kong | Great Taipei vs. Taiwan Cogeneration Corp | Great Taipei vs. Shin Shin Natural |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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