Correlation Between Stock Exchange and Taiwan Weighted
Can any of the company-specific risk be diversified away by investing in both Stock Exchange and Taiwan Weighted 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 Stock Exchange and Taiwan Weighted into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stock Exchange Of and Taiwan Weighted, you can compare the effects of market volatilities on Stock Exchange and Taiwan Weighted 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 Stock Exchange with a short position of Taiwan Weighted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stock Exchange and Taiwan Weighted.
Diversification Opportunities for Stock Exchange and Taiwan Weighted
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Stock and Taiwan is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Stock Exchange Of and Taiwan Weighted in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Weighted and Stock Exchange 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 Stock Exchange Of are associated (or correlated) with Taiwan Weighted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Weighted has no effect on the direction of Stock Exchange i.e., Stock Exchange and Taiwan Weighted go up and down completely randomly.
Pair Corralation between Stock Exchange and Taiwan Weighted
Assuming the 90 days trading horizon Stock Exchange Of is expected to under-perform the Taiwan Weighted. But the index apears to be less risky and, when comparing its historical volatility, Stock Exchange Of is 1.59 times less risky than Taiwan Weighted. The index trades about -0.01 of its potential returns per unit of risk. The Taiwan Weighted is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,041,770 in Taiwan Weighted on February 4, 2024 and sell it today you would lose (8,738) from holding Taiwan Weighted or give up 0.43% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 89.47% |
Values | Daily Returns |
Stock Exchange Of vs. Taiwan Weighted
Performance |
Timeline |
Stock Exchange and Taiwan Weighted Volatility Contrast
Predicted Return Density |
Returns |
Stock Exchange Of
Pair trading matchups for Stock Exchange
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Pair Trading with Stock Exchange and Taiwan Weighted
The main advantage of trading using opposite Stock Exchange and Taiwan Weighted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stock Exchange position performs unexpectedly, Taiwan Weighted 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 Weighted will offset losses from the drop in Taiwan Weighted's long position.Stock Exchange vs. Plan B Media | Stock Exchange vs. Wave Entertainment Public | Stock Exchange vs. Planet Communications Asia | Stock Exchange vs. Silicon Craft Technology |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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