Correlation Between Taiwan Hon and Grape King

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

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

Diversification Opportunities for Taiwan Hon and Grape King

-0.72

Correlation Coefficient

Taiwan Hon  Grape King

Pay attention - limited upside

The 3 months correlation between Taiwan and Grape is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Hon Chuan and Grape King Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grape King Bio and Taiwan Hon 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 Hon Chuan are associated (or correlated) with Grape King. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grape King Bio has no effect on the direction of Taiwan Hon i.e., Taiwan Hon and Grape King go up and down completely randomly.

Pair Corralation between Taiwan Hon and Grape King

Assuming the 90 days trading horizon Taiwan Hon Chuan is expected to under-perform the Grape King. In addition to that, Taiwan Hon is 1.56 times more volatile than Grape King Bio. It trades about -0.05 of its total potential returns per unit of risk. Grape King Bio is currently generating about 0.18 per unit of volatility. If you would invest  14,150  in Grape King Bio on September 5, 2024 and sell it today you would earn a total of  1,600  from holding Grape King Bio or generate 11.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Taiwan Hon Chuan  vs.  Grape King Bio

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 fairly stable basic indicators, Taiwan Hon is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Grape King Bio

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grape King Bio are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Grape King may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Taiwan Hon and Grape King

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

The idea behind Taiwan Hon Chuan and Grape King Bio 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.