Correlation Between TECO Electric and Taiwan Styrene

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

By analyzing existing cross correlation between TECO Electric Machinery and Taiwan Styrene Monomer, you can compare the effects of market volatilities on TECO Electric and Taiwan Styrene 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 TECO Electric with a short position of Taiwan Styrene. Check out your portfolio center. Please also check ongoing floating volatility patterns of TECO Electric and Taiwan Styrene.

Diversification Opportunities for TECO Electric and Taiwan Styrene

-0.6

Correlation Coefficient

TECO Electric  Taiwan Styrene

Excellent diversification

The 3 months correlation between TECO and Taiwan is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding TECO Electric Machinery and Taiwan Styrene Monomer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Styrene Monomer and TECO Electric 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 TECO Electric Machinery are associated (or correlated) with Taiwan Styrene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Styrene Monomer has no effect on the direction of TECO Electric i.e., TECO Electric and Taiwan Styrene go up and down completely randomly.

Pair Corralation between TECO Electric and Taiwan Styrene

Assuming the 90 days trading horizon TECO Electric Machinery is expected to generate 1.34 times more return on investment than Taiwan Styrene. However, TECO Electric is 1.34 times more volatile than Taiwan Styrene Monomer. It trades about 0.09 of its potential returns per unit of risk. Taiwan Styrene Monomer is currently generating about -0.16 per unit of risk. If you would invest  4,850  in TECO Electric Machinery on September 2, 2024 and sell it today you would earn a total of  460.00  from holding TECO Electric Machinery or generate 9.48% return on investment over 90 days.

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

TECO Electric Machinery  vs.  Taiwan Styrene Monomer

TECO Electric Machinery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TECO Electric Machinery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TECO Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Taiwan Styrene Monomer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Styrene Monomer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with TECO Electric and Taiwan Styrene

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

The idea behind TECO Electric Machinery and Taiwan Styrene Monomer 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.