Correlation Between Tainan Spinning and Feng Hsin

Can any of the company-specific risk be diversified away by investing in both Tainan Spinning and Feng Hsin 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 Tainan Spinning and Feng Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tainan Spinning Co and Feng Hsin Steel, you can compare the effects of market volatilities on Tainan Spinning and Feng Hsin 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 Tainan Spinning with a short position of Feng Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and Feng Hsin.

Diversification Opportunities for Tainan Spinning and Feng Hsin

0.64

Correlation Coefficient

Tainan Spinning  Feng Hsin

Poor diversification

The 3 months correlation between Tainan and Feng is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Feng Hsin Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feng Hsin Steel and Tainan Spinning 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 Tainan Spinning Co are associated (or correlated) with Feng Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feng Hsin Steel has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Feng Hsin go up and down completely randomly.

Pair Corralation between Tainan Spinning and Feng Hsin

Assuming the 90 days trading horizon Tainan Spinning Co is expected to generate 0.63 times more return on investment than Feng Hsin. However, Tainan Spinning Co is 1.59 times less risky than Feng Hsin. It trades about -0.1 of its potential returns per unit of risk. Feng Hsin Steel is currently generating about -0.13 per unit of risk. If you would invest  1,585  in Tainan Spinning Co on September 16, 2024 and sell it today you would lose (90.00) from holding Tainan Spinning Co or give up 5.68% of portfolio value over 90 days.

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

Tainan Spinning Co  vs.  Feng Hsin Steel

Tainan Spinning

Risk-Adjusted Performance

0 of 100

Very Weak

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

Feng Hsin Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Feng Hsin Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Tainan Spinning and Feng Hsin

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

The idea behind Tainan Spinning Co and Feng Hsin Steel 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.