Correlation Between Taiwan Hon and BenQ Materials

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

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

Diversification Opportunities for Taiwan Hon and BenQ Materials

-0.64

Correlation Coefficient

Taiwan Hon  BenQ Materials

Excellent diversification

The 3 months correlation between Taiwan and BenQ is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Hon Chuan and BenQ Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BenQ Materials Corp and Taiwan Hon 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 Hon Chuan are associated (or correlated) with BenQ Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BenQ Materials Corp has no effect on the direction of Taiwan Hon i.e., Taiwan Hon and BenQ Materials go up and down completely randomly.

Pair Corralation between Taiwan Hon and BenQ Materials

Assuming the 90 days trading horizon Taiwan Hon Chuan is expected to under-perform the BenQ Materials. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Hon Chuan is 1.28 times less risky than BenQ Materials. The stock trades about -0.13 of its potential returns per unit of risk. The BenQ Materials Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,145  in BenQ Materials Corp on September 15, 2024 and sell it today you would lose (15.00) from holding BenQ Materials Corp or give up 0.48% of portfolio value over 90 days.

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

Taiwan Hon Chuan  vs.  BenQ Materials Corp

Taiwan Hon Chuan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Hon Chuan 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.

BenQ Materials Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days BenQ Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, BenQ Materials 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 Taiwan Hon and BenQ Materials

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

The idea behind Taiwan Hon Chuan and BenQ Materials 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.