Correlation Between Taiwan Navigation and Shan Loong

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

Diversification Opportunities for Taiwan Navigation and Shan Loong

0.51

Correlation Coefficient

Taiwan Navigation  Shan Loong

Very weak diversification

The 3 months correlation between Taiwan and Shan is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Shan Loong Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Loong Transport 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 Shan Loong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Loong Transport has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Shan Loong go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Shan Loong

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 1.11 times more return on investment than Shan Loong. However, Taiwan Navigation is 1.11 times more volatile than Shan Loong Transportation Co. It trades about 0.01 of its potential returns per unit of risk. Shan Loong Transportation Co is currently generating about -0.08 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	Weak
Accuracy	100.0%
Values	Daily Returns

Taiwan Navigation Co  vs.  Shan Loong Transportation Co

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.

Shan Loong Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shan Loong Transportation Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shan Loong 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 Taiwan Navigation and Shan Loong

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

The idea behind Taiwan Navigation Co and Shan Loong Transportation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.