Correlation Between Taiwan Secom and ALi Corp

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

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

Diversification Opportunities for Taiwan Secom and ALi Corp

-0.44

Correlation Coefficient

Taiwan Secom  ALi Corp

Very good diversification

The 3 months correlation between Taiwan and ALi is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Secom Co and ALi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALi Corp and Taiwan Secom 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 Taiwan Secom Co are associated (or correlated) with ALi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALi Corp has no effect on the direction of Taiwan Secom i.e., Taiwan Secom and ALi Corp go up and down completely randomly.

Pair Corralation between Taiwan Secom and ALi Corp

Assuming the 90 days trading horizon Taiwan Secom Co is expected to under-perform the ALi Corp. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Secom Co is 6.05 times less risky than ALi Corp. The stock trades about -0.08 of its potential returns per unit of risk. The ALi Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,245  in ALi Corp on October 6, 2024 and sell it today you would earn a total of  1,455  from holding ALi Corp or generate 64.81% return on investment over 90 days.

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

Taiwan Secom Co  vs.  ALi Corp

Taiwan Secom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Secom Co 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.

ALi Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALi Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ALi Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Secom and ALi Corp

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

The idea behind Taiwan Secom Co and ALi Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .