Correlation Between Taiwan Speciality and ADLINK Technology

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

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

Diversification Opportunities for Taiwan Speciality and ADLINK Technology

-0.1

Correlation Coefficient

Taiwan Speciality  ADLINK Technology

Good diversification

The 3 months correlation between Taiwan and ADLINK is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Speciality Chemicals and ADLINK Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADLINK Technology and Taiwan Speciality 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 Speciality Chemicals are associated (or correlated) with ADLINK Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADLINK Technology has no effect on the direction of Taiwan Speciality i.e., Taiwan Speciality and ADLINK Technology go up and down completely randomly.

Pair Corralation between Taiwan Speciality and ADLINK Technology

Assuming the 90 days trading horizon Taiwan Speciality is expected to generate 2.53 times less return on investment than ADLINK Technology. In addition to that, Taiwan Speciality is 1.52 times more volatile than ADLINK Technology. It trades about 0.01 of its total potential returns per unit of risk. ADLINK Technology is currently generating about 0.03 per unit of volatility. If you would invest  7,140  in ADLINK Technology on September 2, 2024 and sell it today you would earn a total of  210.00  from holding ADLINK Technology or generate 2.94% return on investment over 90 days.

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

Taiwan Speciality Chemicals  vs.  ADLINK Technology

Taiwan Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

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

ADLINK Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADLINK Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ADLINK Technology 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 Speciality and ADLINK Technology

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

The idea behind Taiwan Speciality Chemicals and ADLINK 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.