Correlation Between Taiwan Sakura and Choice Development

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

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

Diversification Opportunities for Taiwan Sakura and Choice Development

0.71

Correlation Coefficient

Taiwan Sakura  Choice Development

Poor diversification

The 3 months correlation between Taiwan and Choice is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Sakura Corp and Choice Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Development and Taiwan Sakura 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 Sakura Corp are associated (or correlated) with Choice Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Development has no effect on the direction of Taiwan Sakura i.e., Taiwan Sakura and Choice Development go up and down completely randomly.

Pair Corralation between Taiwan Sakura and Choice Development

Assuming the 90 days trading horizon Taiwan Sakura Corp is expected to under-perform the Choice Development. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Sakura Corp is 1.3 times less risky than Choice Development. The stock trades about -0.01 of its potential returns per unit of risk. The Choice Development is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,590  in Choice Development on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Choice Development or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Taiwan Sakura Corp  vs.  Choice Development

Taiwan Sakura Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Choice Development

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Taiwan Sakura Corp and Choice Development 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.