Correlation Between Maker and Taiko

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

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

Diversification Opportunities for Maker and Taiko

0.62

Correlation Coefficient

Maker  Taiko

Poor diversification

The 3 months correlation between Maker and Taiko is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Maker and Taiko in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiko and Maker 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 Maker are associated (or correlated) with Taiko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiko has no effect on the direction of Maker i.e., Maker and Taiko go up and down completely randomly.

Pair Corralation between Maker and Taiko

Assuming the 90 days trading horizon Maker is expected to generate 2.88 times less return on investment than Taiko. But when comparing it to its historical volatility, Maker is 1.11 times less risky than Taiko. It trades about 0.05 of its potential returns per unit of risk. Taiko is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  140.00  in Taiko on September 2, 2024 and sell it today you would earn a total of  72.00  from holding Taiko or generate 51.43% return on investment over 90 days.

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

Maker  vs.  Taiko

Maker

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maker are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Maker exhibited solid returns over the last few months and may actually be approaching a breakup point.

Taiko

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiko are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Taiko exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Maker and Taiko

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

The idea behind Maker and Taiko 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.