Correlation Between Taiwan Navigation and Kung Sing

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

Diversification Opportunities for Taiwan Navigation and Kung Sing

0.28

Correlation Coefficient

Taiwan Navigation  Kung Sing

Modest diversification

The 3 months correlation between Taiwan and Kung is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Navigation Co and Kung Sing Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kung Sing Engineering 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 Kung Sing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kung Sing Engineering has no effect on the direction of Taiwan Navigation i.e., Taiwan Navigation and Kung Sing go up and down completely randomly.

Pair Corralation between Taiwan Navigation and Kung Sing

Assuming the 90 days trading horizon Taiwan Navigation Co is expected to generate 0.64 times more return on investment than Kung Sing. However, Taiwan Navigation Co is 1.55 times less risky than Kung Sing. It trades about 0.01 of its potential returns per unit of risk. Kung Sing Engineering is currently generating about 0.0 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.  Kung Sing Engineering

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.

Kung Sing Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kung Sing Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kung Sing 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 Kung Sing

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

The idea behind Taiwan Navigation Co and Kung Sing Engineering 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .