Correlation Between Tong Yang and Shan Loong
Can any of the company-specific risk be diversified away by investing in both Tong Yang and Shan Loong 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 Shan Loong 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 Shan Loong Transportation Co, you can compare the effects of market volatilities on Tong Yang and Shan Loong 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 Shan Loong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Yang and Shan Loong.
Diversification Opportunities for Tong Yang and Shan Loong
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tong and Shan is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tong Yang Industry and Shan Loong Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Loong Transport 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 Shan Loong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Loong Transport has no effect on the direction of Tong Yang i.e., Tong Yang and Shan Loong go up and down completely randomly.
Pair Corralation between Tong Yang and Shan Loong
Assuming the 90 days trading horizon Tong Yang Industry is expected to under-perform the Shan Loong. In addition to that, Tong Yang is 1.22 times more volatile than Shan Loong Transportation Co. It trades about -0.02 of its total potential returns per unit of risk. Shan Loong Transportation Co is currently generating about 0.04 per unit of volatility. If you would invest 1,705 in Shan Loong Transportation Co on November 7, 2024 and sell it today you would earn a total of 15.00 from holding Shan Loong Transportation Co or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tong Yang Industry vs. Shan Loong Transportation Co
Performance |
| Timeline |
| Tong Yang Industry |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Shan Loong Transport |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Tong Yang and Shan Loong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tong Yang and Shan Loong
The main advantage of trading using opposite Tong Yang and Shan Loong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Yang position performs unexpectedly, Shan Loong 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 Shan Loong will offset losses from the drop in Shan Loong's long position.The idea behind Tong Yang Industry and Shan Loong Transportation 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.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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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