Correlation Between Everlight Chemical and Tainan Spinning

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

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

Diversification Opportunities for Everlight Chemical and Tainan Spinning

0.79

Correlation Coefficient

Everlight Chemical  Tainan Spinning

Poor diversification

The 3 months correlation between Everlight and Tainan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Everlight Chemical Industrial and Tainan Spinning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Spinning and Everlight Chemical 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 Everlight Chemical Industrial are associated (or correlated) with Tainan Spinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Spinning has no effect on the direction of Everlight Chemical i.e., Everlight Chemical and Tainan Spinning go up and down completely randomly.

Pair Corralation between Everlight Chemical and Tainan Spinning

Assuming the 90 days trading horizon Everlight Chemical Industrial is expected to generate 1.39 times more return on investment than Tainan Spinning. However, Everlight Chemical is 1.39 times more volatile than Tainan Spinning Co. It trades about 0.03 of its potential returns per unit of risk. Tainan Spinning Co is currently generating about -0.01 per unit of risk. If you would invest  1,860  in Everlight Chemical Industrial on September 12, 2024 and sell it today you would earn a total of  395.00  from holding Everlight Chemical Industrial or generate 21.24% return on investment over 90 days.

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

Everlight Chemical Industrial  vs.  Tainan Spinning Co

Everlight Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everlight Chemical Industrial 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.

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.

Pair Trading with Everlight Chemical and Tainan Spinning

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

The idea behind Everlight Chemical Industrial and Tainan Spinning Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.