Correlation Between Great Taipei and Highlight Tech

Can any of the company-specific risk be diversified away by investing in both Great Taipei and Highlight Tech 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 Great Taipei and Highlight Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great Taipei Gas and Highlight Tech, you can compare the effects of market volatilities on Great Taipei and Highlight Tech 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 Great Taipei with a short position of Highlight Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Taipei and Highlight Tech.

Diversification Opportunities for Great Taipei and Highlight Tech

-0.01

Correlation Coefficient

Great Taipei  Highlight Tech

Good diversification

The 3 months correlation between Great and Highlight is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Great Taipei Gas and Highlight Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Tech and Great Taipei 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 Great Taipei Gas are associated (or correlated) with Highlight Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Tech has no effect on the direction of Great Taipei i.e., Great Taipei and Highlight Tech go up and down completely randomly.

Pair Corralation between Great Taipei and Highlight Tech

Assuming the 90 days trading horizon Great Taipei Gas is expected to under-perform the Highlight Tech. But the stock apears to be less risky and, when comparing its historical volatility, Great Taipei Gas is 15.64 times less risky than Highlight Tech. The stock trades about -0.07 of its potential returns per unit of risk. The Highlight Tech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,180  in Highlight Tech on September 4, 2024 and sell it today you would earn a total of  110.00  from holding Highlight Tech or generate 2.12% return on investment over 90 days.

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

Great Taipei Gas  vs.  Highlight Tech

Great Taipei Gas

Risk-Adjusted Performance

0 of 100

Very Weak

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

Highlight Tech

Risk-Adjusted Performance

2 of 100

Weak

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

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

The idea behind Great Taipei Gas and Highlight Tech 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.