Correlation Between Taiwan Fu and Xxentria Technology

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

By analyzing existing cross correlation between Taiwan Fu Hsing and Xxentria Technology Materials, you can compare the effects of market volatilities on Taiwan Fu and Xxentria Technology 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 Fu with a short position of Xxentria Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Fu and Xxentria Technology.

Diversification Opportunities for Taiwan Fu and Xxentria Technology

0.72

Correlation Coefficient

Taiwan Fu  Xxentria Technology

Poor diversification

The 3 months correlation between Taiwan and Xxentria is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Fu Hsing and Xxentria Technology Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xxentria Technology and Taiwan Fu 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 Fu Hsing are associated (or correlated) with Xxentria Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xxentria Technology has no effect on the direction of Taiwan Fu i.e., Taiwan Fu and Xxentria Technology go up and down completely randomly.

Pair Corralation between Taiwan Fu and Xxentria Technology

Assuming the 90 days trading horizon Taiwan Fu is expected to generate 34.28 times less return on investment than Xxentria Technology. But when comparing it to its historical volatility, Taiwan Fu Hsing is 33.12 times less risky than Xxentria Technology. It trades about 0.04 of its potential returns per unit of risk. Xxentria Technology Materials is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,410  in Xxentria Technology Materials on September 21, 2024 and sell it today you would earn a total of  1,060  from holding Xxentria Technology Materials or generate 24.04% return on investment over 90 days.

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

Taiwan Fu Hsing  vs.  Xxentria Technology Materials

Taiwan Fu Hsing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Fu Hsing 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.

Xxentria Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xxentria Technology Materials 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.

Pair Trading with Taiwan Fu and Xxentria Technology

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

The idea behind Taiwan Fu Hsing and Xxentria Technology Materials 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.