Correlation Between New Germany and Taiwan Closed

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

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

Diversification Opportunities for New Germany and Taiwan Closed

0.53

Correlation Coefficient

New Germany  Taiwan Closed

Very weak diversification

The 3 months correlation between New and Taiwan is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding New Germany Closed and Taiwan Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Closed and New Germany 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 New Germany Closed 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 New Germany i.e., New Germany and Taiwan Closed go up and down completely randomly.

Pair Corralation between New Germany and Taiwan Closed

Allowing for the 90-day total investment horizon New Germany Closed is expected to under-perform the Taiwan Closed. But the fund apears to be less risky and, when comparing its historical volatility, New Germany Closed is 1.59 times less risky than Taiwan Closed. The fund trades about -0.06 of its potential returns per unit of risk. The Taiwan Closed is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,333  in Taiwan Closed on September 3, 2024 and sell it today you would lose (70.00) from holding Taiwan Closed or give up 1.62% of portfolio value over 90 days.

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

New Germany Closed  vs.  Taiwan Closed

New Germany Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Germany Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable technical and fundamental indicators, New Germany is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Taiwan Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Closed has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, Taiwan Closed is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with New Germany and Taiwan Closed

The main advantage of trading using opposite New Germany and Taiwan Closed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Germany 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 New Germany Closed 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.