Correlation Between Great Taipei and HIM International

Can any of the company-specific risk be diversified away by investing in both Great Taipei and HIM International 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 HIM International 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 HIM International Music, you can compare the effects of market volatilities on Great Taipei and HIM International 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 HIM International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Taipei and HIM International.

Diversification Opportunities for Great Taipei and HIM International

-0.17

Correlation Coefficient

Great Taipei  HIM International

Good diversification

The 3 months correlation between Great and HIM is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Great Taipei Gas and HIM International Music in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HIM International Music 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 HIM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HIM International Music has no effect on the direction of Great Taipei i.e., Great Taipei and HIM International go up and down completely randomly.

Pair Corralation between Great Taipei and HIM International

Assuming the 90 days trading horizon Great Taipei Gas is expected to generate 0.17 times more return on investment than HIM International. However, Great Taipei Gas is 6.05 times less risky than HIM International. It trades about 0.03 of its potential returns per unit of risk. HIM International Music is currently generating about -0.15 per unit of risk. If you would invest  3,005  in Great Taipei Gas on September 15, 2024 and sell it today you would earn a total of  5.00  from holding Great Taipei Gas or generate 0.17% return on investment over 90 days.

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

Great Taipei Gas  vs.  HIM International Music

Great Taipei Gas

Risk-Adjusted Performance

0 of 100

Very Weak

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

HIM International Music

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HIM International Music are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, HIM International 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 Great Taipei and HIM International

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

The idea behind Great Taipei Gas and HIM International Music 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.