Correlation Between Taiwan Hon and Connection Technology

Can any of the company-specific risk be diversified away by investing in both Taiwan Hon and Connection 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 Hon and Connection Technology 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 Connection Technology Systems, you can compare the effects of market volatilities on Taiwan Hon and Connection 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 Hon with a short position of Connection Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Hon and Connection Technology.

Diversification Opportunities for Taiwan Hon and Connection Technology

-0.49

Correlation Coefficient

Taiwan Hon  Connection Technology

Very good diversification

The 3 months correlation between Taiwan and Connection is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Hon Chuan and Connection Technology Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connection Technology 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 Connection Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connection Technology has no effect on the direction of Taiwan Hon i.e., Taiwan Hon and Connection Technology go up and down completely randomly.

Pair Corralation between Taiwan Hon and Connection Technology

Assuming the 90 days trading horizon Taiwan Hon Chuan is expected to under-perform the Connection Technology. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Hon Chuan is 2.33 times less risky than Connection Technology. The stock trades about -0.08 of its potential returns per unit of risk. The Connection Technology Systems is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,980  in Connection Technology Systems on September 3, 2024 and sell it today you would earn a total of  145.00  from holding Connection Technology Systems or generate 7.32% return on investment over 90 days.

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

Taiwan Hon Chuan  vs.  Connection Technology Systems

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 latest abnormal 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.

Connection Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Connection Technology Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Connection Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Taiwan Hon and Connection Technology

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

The idea behind Taiwan Hon Chuan and Connection Technology Systems 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.