Correlation Between GeneFerm Biotechnology and ABC Taiwan

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

By analyzing existing cross correlation between GeneFerm Biotechnology Co and ABC Taiwan Electronics, you can compare the effects of market volatilities on GeneFerm Biotechnology and ABC Taiwan 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 GeneFerm Biotechnology with a short position of ABC Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of GeneFerm Biotechnology and ABC Taiwan.

Diversification Opportunities for GeneFerm Biotechnology and ABC Taiwan

0.5

Correlation Coefficient

GeneFerm Biotechnology  ABC Taiwan

Very weak diversification

The 3 months correlation between GeneFerm and ABC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding GeneFerm Biotechnology Co and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics and GeneFerm Biotechnology 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 GeneFerm Biotechnology Co are associated (or correlated) with ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of GeneFerm Biotechnology i.e., GeneFerm Biotechnology and ABC Taiwan go up and down completely randomly.

Pair Corralation between GeneFerm Biotechnology and ABC Taiwan

Assuming the 90 days trading horizon GeneFerm Biotechnology is expected to generate 2.86 times less return on investment than ABC Taiwan. In addition to that, GeneFerm Biotechnology is 1.31 times more volatile than ABC Taiwan Electronics. It trades about 0.05 of its total potential returns per unit of risk. ABC Taiwan Electronics is currently generating about 0.19 per unit of volatility. If you would invest  1,960  in ABC Taiwan Electronics on September 4, 2024 and sell it today you would earn a total of  340.00  from holding ABC Taiwan Electronics or generate 17.35% return on investment over 90 days.

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

GeneFerm Biotechnology Co  vs.  ABC Taiwan Electronics

GeneFerm Biotechnology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GeneFerm Biotechnology Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, GeneFerm Biotechnology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ABC Taiwan Electronics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABC Taiwan Electronics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ABC Taiwan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GeneFerm Biotechnology and ABC Taiwan

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

The idea behind GeneFerm Biotechnology Co and ABC Taiwan Electronics 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.