Correlation Between Steel Dynamics and Taichung Commercial

Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Taichung Commercial 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 Steel Dynamics and Taichung Commercial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Steel Dynamics and Taichung Commercial Bank, you can compare the effects of market volatilities on Steel Dynamics and Taichung Commercial 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 Steel Dynamics with a short position of Taichung Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Taichung Commercial.

Diversification Opportunities for Steel Dynamics and Taichung Commercial

-0.48

Correlation Coefficient

Steel Dynamics  Taichung Commercial

Very good diversification

The 3 months correlation between Steel and Taichung is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Taichung Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taichung Commercial Bank and Steel Dynamics 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 Steel Dynamics are associated (or correlated) with Taichung Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taichung Commercial Bank has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Taichung Commercial go up and down completely randomly.

Pair Corralation between Steel Dynamics and Taichung Commercial

Given the investment horizon of 90 days Steel Dynamics is expected to under-perform the Taichung Commercial. In addition to that, Steel Dynamics is 2.65 times more volatile than Taichung Commercial Bank. It trades about -0.04 of its total potential returns per unit of risk. Taichung Commercial Bank is currently generating about 0.05 per unit of volatility. If you would invest  1,865  in Taichung Commercial Bank on December 2, 2024 and sell it today you would earn a total of  35.00  from holding Taichung Commercial Bank or generate 1.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.44%
Values	Daily Returns

Steel Dynamics  vs.  Taichung Commercial Bank

Steel Dynamics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steel Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Steel Dynamics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Taichung Commercial Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Taichung Commercial Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taichung Commercial 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 Steel Dynamics and Taichung Commercial

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

The idea behind Steel Dynamics and Taichung Commercial Bank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.