Correlation Between Alchip Technologies and Taiwan Hon

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

By analyzing existing cross correlation between Alchip Technologies and Taiwan Hon Chuan, you can compare the effects of market volatilities on Alchip Technologies and Taiwan Hon 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 Alchip Technologies with a short position of Taiwan Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alchip Technologies and Taiwan Hon.

Diversification Opportunities for Alchip Technologies and Taiwan Hon

-0.03

Correlation Coefficient

Alchip Technologies  Taiwan Hon

Good diversification

The 3 months correlation between Alchip and Taiwan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Alchip Technologies and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan and Alchip Technologies 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 Alchip Technologies are associated (or correlated) with Taiwan Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of Alchip Technologies i.e., Alchip Technologies and Taiwan Hon go up and down completely randomly.

Pair Corralation between Alchip Technologies and Taiwan Hon

Assuming the 90 days trading horizon Alchip Technologies is expected to generate 2.52 times more return on investment than Taiwan Hon. However, Alchip Technologies is 2.52 times more volatile than Taiwan Hon Chuan. It trades about 0.13 of its potential returns per unit of risk. Taiwan Hon Chuan is currently generating about -0.13 per unit of risk. If you would invest  203,000  in Alchip Technologies on September 2, 2024 and sell it today you would earn a total of  18,500  from holding Alchip Technologies or generate 9.11% return on investment over 90 days.

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

Alchip Technologies  vs.  Taiwan Hon Chuan

Alchip Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alchip Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Taiwan Hon Chuan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Hon Chuan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Alchip Technologies and Taiwan Hon

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

The idea behind Alchip Technologies and Taiwan Hon Chuan 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.