Correlation Between Taiwan High and Aero Win

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

By analyzing existing cross correlation between Taiwan High Speed and Aero Win Technology, you can compare the effects of market volatilities on Taiwan High and Aero Win 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 High with a short position of Aero Win. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan High and Aero Win.

Diversification Opportunities for Taiwan High and Aero Win

-0.21

Correlation Coefficient

Taiwan High  Aero Win

Very good diversification

The 3 months correlation between Taiwan and Aero is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan High Speed and Aero Win Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aero Win Technology and Taiwan High 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 High Speed are associated (or correlated) with Aero Win. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aero Win Technology has no effect on the direction of Taiwan High i.e., Taiwan High and Aero Win go up and down completely randomly.

Pair Corralation between Taiwan High and Aero Win

Assuming the 90 days trading horizon Taiwan High Speed is expected to under-perform the Aero Win. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan High Speed is 3.66 times less risky than Aero Win. The stock trades about -0.07 of its potential returns per unit of risk. The Aero Win Technology is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,355  in Aero Win Technology on September 4, 2024 and sell it today you would earn a total of  465.00  from holding Aero Win Technology or generate 13.86% return on investment over 90 days.

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

Taiwan High Speed  vs.  Aero Win Technology

Taiwan High Speed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aero Win Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aero Win Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aero Win showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan High and Aero Win

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

The idea behind Taiwan High Speed and Aero Win Technology 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.