Correlation Between Taiwan Secom and Chen Full

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

Diversification Opportunities for Taiwan Secom and Chen Full

0.02

Correlation Coefficient

Taiwan Secom  Chen Full

Significant diversification

The 3 months correlation between Taiwan and Chen is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Secom Co and Chen Full International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chen Full International 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 Chen Full. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chen Full International has no effect on the direction of Taiwan Secom i.e., Taiwan Secom and Chen Full go up and down completely randomly.

Pair Corralation between Taiwan Secom and Chen Full

Assuming the 90 days trading horizon Taiwan Secom is expected to generate 13.32 times less return on investment than Chen Full. But when comparing it to its historical volatility, Taiwan Secom Co is 2.57 times less risky than Chen Full. It trades about 0.02 of its potential returns per unit of risk. Chen Full International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,500  in Chen Full International on December 29, 2024 and sell it today you would earn a total of  610.00  from holding Chen Full International or generate 13.56% return on investment over 90 days.

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

Taiwan Secom Co  vs.  Chen Full International

Taiwan Secom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Secom Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Secom is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chen Full International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chen Full International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chen Full showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Secom and Chen Full

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

The idea behind Taiwan Secom Co and Chen Full International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.