Correlation Between Pou Chen and Taiwan Secom

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

By analyzing existing cross correlation between Pou Chen Corp and Taiwan Secom Co, you can compare the effects of market volatilities on Pou Chen and Taiwan Secom 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 Pou Chen with a short position of Taiwan Secom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pou Chen and Taiwan Secom.

Diversification Opportunities for Pou Chen and Taiwan Secom

-0.61

Correlation Coefficient

Pou Chen  Taiwan Secom

Excellent diversification

The 3 months correlation between Pou and Taiwan is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Pou Chen Corp and Taiwan Secom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Secom and Pou Chen 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 Pou Chen Corp are associated (or correlated) with Taiwan Secom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Secom has no effect on the direction of Pou Chen i.e., Pou Chen and Taiwan Secom go up and down completely randomly.

Pair Corralation between Pou Chen and Taiwan Secom

Assuming the 90 days trading horizon Pou Chen Corp is expected to generate 1.15 times more return on investment than Taiwan Secom. However, Pou Chen is 1.15 times more volatile than Taiwan Secom Co. It trades about 0.26 of its potential returns per unit of risk. Taiwan Secom Co is currently generating about -0.12 per unit of risk. If you would invest  3,325  in Pou Chen Corp on September 4, 2024 and sell it today you would earn a total of  975.00  from holding Pou Chen Corp or generate 29.32% return on investment over 90 days.

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

Pou Chen Corp  vs.  Taiwan Secom Co

Pou Chen Corp

Risk-Adjusted Performance

20 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pou Chen Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Pou Chen showed solid returns over the last few months and may actually be approaching a breakup point.

Taiwan Secom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Secom Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Pou Chen and Taiwan Secom

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

The idea behind Pou Chen Corp and Taiwan Secom Co 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.