Correlation Between Taiwan Weighted and Eminent Luggage

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

By analyzing existing cross correlation between Taiwan Weighted and Eminent Luggage, you can compare the effects of market volatilities on Taiwan Weighted and Eminent Luggage 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 Eminent Luggage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Eminent Luggage.

Diversification Opportunities for Taiwan Weighted and Eminent Luggage

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Correlation Coefficient

Taiwan Weighted  Eminent Luggage

Pay attention - limited upside

The 3 months correlation between Taiwan and Eminent is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Eminent Luggage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eminent Luggage 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 Eminent Luggage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eminent Luggage has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Eminent Luggage go up and down completely randomly.

Pair Corralation between Taiwan Weighted and Eminent Luggage

Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the Eminent Luggage. But the index apears to be less risky and, when comparing its historical volatility, Taiwan Weighted is 2.35 times less risky than Eminent Luggage. The index trades about -0.04 of its potential returns per unit of risk. The Eminent Luggage is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,285  in Eminent Luggage on December 5, 2024 and sell it today you would earn a total of  110.00  from holding Eminent Luggage or generate 8.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Taiwan Weighted  vs.  Eminent Luggage

Pair Trading with Taiwan Weighted and Eminent Luggage

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

The idea behind Taiwan Weighted and Eminent Luggage 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.