Correlation Between Taiwan Hon and Advanced International

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

Diversification Opportunities for Taiwan Hon and Advanced International

0.79

Correlation Coefficient

Taiwan Hon  Advanced International

Poor diversification

The 3 months correlation between Taiwan and Advanced is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Hon Chuan and Advanced International Multite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced International 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 Advanced International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced International has no effect on the direction of Taiwan Hon i.e., Taiwan Hon and Advanced International go up and down completely randomly.

Pair Corralation between Taiwan Hon and Advanced International

Assuming the 90 days trading horizon Taiwan Hon Chuan is expected to generate 1.63 times more return on investment than Advanced International. However, Taiwan Hon is 1.63 times more volatile than Advanced International Multitech. It trades about 0.19 of its potential returns per unit of risk. Advanced International Multitech is currently generating about 0.18 per unit of risk. If you would invest  14,550  in Taiwan Hon Chuan on December 7, 2024 and sell it today you would earn a total of  1,900  from holding Taiwan Hon Chuan or generate 13.06% return on investment over 90 days.

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

Taiwan Hon Chuan  vs.  Advanced International Multite

Taiwan Hon Chuan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Hon Chuan are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Hon showed solid returns over the last few months and may actually be approaching a breakup point.

Advanced International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced International Multitech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Taiwan Hon and Advanced International

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

The idea behind Taiwan Hon Chuan and Advanced International Multitech 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.