Correlation Between Tong Yang and Gordon Auto

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Can any of the company-specific risk be diversified away by investing in both Tong Yang and Gordon Auto 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 Tong Yang and Gordon Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tong Yang Industry and Gordon Auto Body, you can compare the effects of market volatilities on Tong Yang and Gordon Auto 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 Tong Yang with a short position of Gordon Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Yang and Gordon Auto.

Diversification Opportunities for Tong Yang and Gordon Auto

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Tong and Gordon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tong Yang Industry and Gordon Auto Body in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gordon Auto Body and Tong Yang 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 Tong Yang Industry are associated (or correlated) with Gordon Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gordon Auto Body has no effect on the direction of Tong Yang i.e., Tong Yang and Gordon Auto go up and down completely randomly.

Pair Corralation between Tong Yang and Gordon Auto

Assuming the 90 days trading horizon Tong Yang Industry is expected to under-perform the Gordon Auto. But the stock apears to be less risky and, when comparing its historical volatility, Tong Yang Industry is 1.49 times less risky than Gordon Auto. The stock trades about -0.13 of its potential returns per unit of risk. The Gordon Auto Body is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,870  in Gordon Auto Body on October 25, 2024 and sell it today you would lose (145.00) from holding Gordon Auto Body or give up 3.75% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Tong Yang Industry  vs.  Gordon Auto Body

 Performance 
       Timeline  
Tong Yang Industry 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Tong Yang Industry are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Tong Yang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Gordon Auto Body 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Gordon Auto Body are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Gordon Auto is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tong Yang and Gordon Auto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tong Yang and Gordon Auto

The main advantage of trading using opposite Tong Yang and Gordon Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Yang position performs unexpectedly, Gordon Auto 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 Gordon Auto will offset losses from the drop in Gordon Auto's long position.
The idea behind Tong Yang Industry and Gordon Auto Body 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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