Correlation Between Taiwan Navigation and Powertech Industrial

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

Diversification Opportunities for Taiwan Navigation and Powertech Industrial

-0.13

Correlation Coefficient

Taiwan Navigation  Powertech Industrial

Good diversification

The 3 months correlation between Taiwan and Powertech is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Powertech Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powertech Industrial 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 Powertech Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powertech Industrial has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Powertech Industrial go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Powertech Industrial

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to under-perform the Powertech Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Navigation Co is 2.45 times less risky than Powertech Industrial. The stock trades about -0.03 of its potential returns per unit of risk. The Powertech Industrial Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,475  in Powertech Industrial Co on September 13, 2024 and sell it today you would earn a total of  970.00  from holding Powertech Industrial Co or generate 39.19% return on investment over 90 days.

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

Taiwan Navigation Co  vs.  Powertech Industrial Co

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.

Powertech Industrial

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Taiwan Navigation and Powertech Industrial

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

The idea behind Taiwan Navigation Co and Powertech Industrial 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.