Correlation Between Giant Manufacturing and Taiwan Paiho

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

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

Diversification Opportunities for Giant Manufacturing and Taiwan Paiho

-0.6

Correlation Coefficient

Giant Manufacturing  Taiwan Paiho

Excellent diversification

The 3 months correlation between Giant and Taiwan is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and Taiwan Paiho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Paiho and Giant Manufacturing 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 Giant Manufacturing Co are associated (or correlated) with Taiwan Paiho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Paiho has no effect on the direction of Giant Manufacturing i.e., Giant Manufacturing and Taiwan Paiho go up and down completely randomly.

Pair Corralation between Giant Manufacturing and Taiwan Paiho

Assuming the 90 days trading horizon Giant Manufacturing Co is expected to under-perform the Taiwan Paiho. In addition to that, Giant Manufacturing is 1.05 times more volatile than Taiwan Paiho. It trades about -0.02 of its total potential returns per unit of risk. Taiwan Paiho is currently generating about 0.04 per unit of volatility. If you would invest  5,600  in Taiwan Paiho on September 17, 2024 and sell it today you would earn a total of  1,570  from holding Taiwan Paiho or generate 28.04% return on investment over 90 days.

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

Giant Manufacturing Co  vs.  Taiwan Paiho

Giant Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Taiwan Paiho

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Paiho are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Paiho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Giant Manufacturing and Taiwan Paiho

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

The idea behind Giant Manufacturing Co and Taiwan Paiho 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..