Correlation Between Taiwan Navigation and Sunonwealth Electric

Can any of the company-specific risk be diversified away by investing in both Taiwan Navigation and Sunonwealth Electric 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 Sunonwealth Electric 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 Sunonwealth Electric Machine, you can compare the effects of market volatilities on Taiwan Navigation and Sunonwealth Electric 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 Sunonwealth Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Navigation and Sunonwealth Electric.

Diversification Opportunities for Taiwan Navigation and Sunonwealth Electric

0.16

Correlation Coefficient

Taiwan Navigation  Sunonwealth Electric

Average diversification

The 3 months correlation between Taiwan and Sunonwealth is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Sunonwealth Electric Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunonwealth Electric 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 Sunonwealth Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunonwealth Electric has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Sunonwealth Electric go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Sunonwealth Electric

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to under-perform the Sunonwealth Electric. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Navigation Co is 2.38 times less risky than Sunonwealth Electric. The stock trades about -0.03 of its potential returns per unit of risk. The Sunonwealth Electric Machine is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,040  in Sunonwealth Electric Machine on September 13, 2024 and sell it today you would earn a total of  1,260  from holding Sunonwealth Electric Machine or generate 13.94% return on investment over 90 days.

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

Taiwan Navigation Co  vs.  Sunonwealth Electric Machine

Taiwan Navigation

Risk-Adjusted Performance

0 of 100

Very 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.

Sunonwealth Electric

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunonwealth Electric Machine are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunonwealth Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Navigation and Sunonwealth Electric

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

The idea behind Taiwan Navigation Co and Sunonwealth Electric Machine 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.