Correlation Between Holiday Entertainment and Taiwan Cement

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

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

Diversification Opportunities for Holiday Entertainment and Taiwan Cement

0.83

Correlation Coefficient

Holiday Entertainment  Taiwan Cement

Very poor diversification

The 3 months correlation between Holiday and Taiwan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Entertainment Co and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and Holiday Entertainment 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 Holiday Entertainment Co are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Holiday Entertainment i.e., Holiday Entertainment and Taiwan Cement go up and down completely randomly.

Pair Corralation between Holiday Entertainment and Taiwan Cement

Assuming the 90 days trading horizon Holiday Entertainment Co is expected to under-perform the Taiwan Cement. In addition to that, Holiday Entertainment is 5.07 times more volatile than Taiwan Cement Corp. It trades about -0.07 of its total potential returns per unit of risk. Taiwan Cement Corp is currently generating about -0.06 per unit of volatility. If you would invest  4,700  in Taiwan Cement Corp on September 30, 2024 and sell it today you would lose (50.00) from holding Taiwan Cement Corp or give up 1.06% of portfolio value over 90 days.

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

Holiday Entertainment Co  vs.  Taiwan Cement Corp

Holiday Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holiday Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holiday Entertainment is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Cement Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Cement Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Taiwan Cement is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Holiday Entertainment and Taiwan Cement

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

The idea behind Holiday Entertainment Co and Taiwan Cement 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.