Correlation Between Taiwan Navigation and Walsin Lihwa

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

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

Diversification Opportunities for Taiwan Navigation and Walsin Lihwa

0.29

Correlation Coefficient

Taiwan Navigation  Walsin Lihwa

Modest diversification

The 3 months correlation between Taiwan and Walsin is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Walsin Lihwa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walsin Lihwa Corp and Taiwan Navigation 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 Taiwan Navigation Co are associated (or correlated) with Walsin Lihwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walsin Lihwa Corp has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Walsin Lihwa go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Walsin Lihwa

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 0.61 times more return on investment than Walsin Lihwa. However, Taiwan Navigation Co is 1.63 times less risky than Walsin Lihwa. It trades about 0.01 of its potential returns per unit of risk. Walsin Lihwa Corp is currently generating about -0.15 per unit of risk. If you would invest  3,070  in Taiwan Navigation Co on September 12, 2024 and sell it today you would earn a total of  10.00  from holding Taiwan Navigation Co or generate 0.33% return on investment over 90 days.

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

Taiwan Navigation Co  vs.  Walsin Lihwa Corp

Taiwan Navigation

Risk-Adjusted Performance

0 of 100

Weak

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

Walsin Lihwa Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walsin Lihwa Corp 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 Taiwan Navigation and Walsin Lihwa

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

The idea behind Taiwan Navigation Co and Walsin Lihwa Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.