Correlation Between Taiwan Weighted and New Era
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and New Era 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 Weighted and New Era into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and New Era Electronics, you can compare the effects of market volatilities on Taiwan Weighted and New Era 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 Weighted with a short position of New Era. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and New Era.
Diversification Opportunities for Taiwan Weighted and New Era
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Taiwan and New is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and New Era Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Electronics and Taiwan Weighted 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 Weighted are associated (or correlated) with New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Electronics has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and New Era go up and down completely randomly.
Pair Corralation between Taiwan Weighted and New Era
Assuming the 90 days trading horizon Taiwan Weighted is expected to generate 0.32 times more return on investment than New Era. However, Taiwan Weighted is 3.08 times less risky than New Era. It trades about -0.08 of its potential returns per unit of risk. New Era Electronics is currently generating about -0.03 per unit of risk. If you would invest 2,319,020 in Taiwan Weighted on December 28, 2024 and sell it today you would lose (123,844) from holding Taiwan Weighted or give up 5.34% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 98.21% |
Values | Daily Returns |
Taiwan Weighted vs. New Era Electronics
Performance |
Timeline |
Taiwan Weighted and New Era Volatility Contrast
Predicted Return Density |
Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
New Era Electronics
Pair trading matchups for New Era
Pair Trading with Taiwan Weighted and New Era
The main advantage of trading using opposite Taiwan Weighted and New Era positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, New Era 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 New Era will offset losses from the drop in New Era's long position.Taiwan Weighted vs. Universal Vision Biotechnology | Taiwan Weighted vs. Level Biotechnology | Taiwan Weighted vs. Landis Taipei Hotel | Taiwan Weighted vs. Formosa International Hotels |
New Era vs. Asia Metal Industries | New Era vs. Taichung Commercial Bank | New Era vs. Feng Ching Metal | New Era vs. Lian Hwa Foods |
Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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