Correlation Between Everlight Chemical and Taiwan Fertilizer

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

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

Diversification Opportunities for Everlight Chemical and Taiwan Fertilizer

0.36

Correlation Coefficient

Everlight Chemical  Taiwan Fertilizer

Weak diversification

The 3 months correlation between Everlight and Taiwan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Everlight Chemical Industrial and Taiwan Fertilizer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Fertilizer and Everlight Chemical 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 Everlight Chemical Industrial are associated (or correlated) with Taiwan Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Fertilizer has no effect on the direction of Everlight Chemical i.e., Everlight Chemical and Taiwan Fertilizer go up and down completely randomly.

Pair Corralation between Everlight Chemical and Taiwan Fertilizer

Assuming the 90 days trading horizon Everlight Chemical Industrial is expected to under-perform the Taiwan Fertilizer. In addition to that, Everlight Chemical is 1.26 times more volatile than Taiwan Fertilizer Co. It trades about -0.03 of its total potential returns per unit of risk. Taiwan Fertilizer Co is currently generating about 0.0 per unit of volatility. If you would invest  6,550  in Taiwan Fertilizer Co on March 14, 2024 and sell it today you would lose (30.00) from holding Taiwan Fertilizer Co or give up 0.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Everlight Chemical Industrial  vs.  Taiwan Fertilizer Co

Everlight Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everlight Chemical Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Everlight Chemical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taiwan Fertilizer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Fertilizer Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Fertilizer is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Everlight Chemical and Taiwan Fertilizer

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

The idea behind Everlight Chemical Industrial and Taiwan Fertilizer Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.