Correlation Between Taiwan Fire and Kings Town

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

By analyzing existing cross correlation between Taiwan Fire Marine and Kings Town Bank, you can compare the effects of market volatilities on Taiwan Fire and Kings Town 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 Fire with a short position of Kings Town. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Fire and Kings Town.

Diversification Opportunities for Taiwan Fire and Kings Town

-0.46

Correlation Coefficient

Taiwan Fire  Kings Town

Very good diversification

The 3 months correlation between Taiwan and Kings is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Fire Marine and Kings Town Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kings Town Bank and Taiwan Fire 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 Fire Marine are associated (or correlated) with Kings Town. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kings Town Bank has no effect on the direction of Taiwan Fire i.e., Taiwan Fire and Kings Town go up and down completely randomly.

Pair Corralation between Taiwan Fire and Kings Town

Assuming the 90 days trading horizon Taiwan Fire Marine is expected to generate 0.29 times more return on investment than Kings Town. However, Taiwan Fire Marine is 3.45 times less risky than Kings Town. It trades about 0.17 of its potential returns per unit of risk. Kings Town Bank is currently generating about -0.06 per unit of risk. If you would invest  2,800  in Taiwan Fire Marine on September 16, 2024 and sell it today you would earn a total of  145.00  from holding Taiwan Fire Marine or generate 5.18% return on investment over 90 days.

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

Taiwan Fire Marine  vs.  Kings Town Bank

Taiwan Fire Marine

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Fire Marine are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taiwan Fire is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Kings Town Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kings Town Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kings Town 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 Fire and Kings Town

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

The idea behind Taiwan Fire Marine and Kings Town Bank 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.

Check out your portfolio center.

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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.