Correlation Between Us Small and Taiwan Closed

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

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

Diversification Opportunities for Us Small and Taiwan Closed

-0.08

Correlation Coefficient

Us Small  Taiwan Closed

Good diversification

The 3 months correlation between DFSVX and Taiwan is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Taiwan Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Closed and Us Small 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 Us Small Cap are associated (or correlated) with Taiwan Closed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Closed has no effect on the direction of Us Small i.e., Us Small and Taiwan Closed go up and down completely randomly.

Pair Corralation between Us Small and Taiwan Closed

Assuming the 90 days horizon Us Small is expected to generate 1.02 times less return on investment than Taiwan Closed. But when comparing it to its historical volatility, Us Small Cap is 1.02 times less risky than Taiwan Closed. It trades about 0.09 of its potential returns per unit of risk. Taiwan Closed is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,273  in Taiwan Closed on September 15, 2024 and sell it today you would earn a total of  302.00  from holding Taiwan Closed or generate 7.07% return on investment over 90 days.

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

Us Small Cap  vs.  Taiwan Closed

Us Small Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Us Small Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Us Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Taiwan Closed

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Closed are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile basic indicators, Taiwan Closed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Us Small and Taiwan Closed

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

The idea behind Us Small Cap and Taiwan Closed 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.