Correlation Between Tong Yang and Actron Technology
Can any of the company-specific risk be diversified away by investing in both Tong Yang and Actron Technology 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 Actron Technology 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 Actron Technology, you can compare the effects of market volatilities on Tong Yang and Actron Technology 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 Actron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Yang and Actron Technology.
Diversification Opportunities for Tong Yang and Actron Technology
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Tong and Actron is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Tong Yang Industry and Actron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Actron Technology 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 Actron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Actron Technology has no effect on the direction of Tong Yang i.e., Tong Yang and Actron Technology go up and down completely randomly.
Pair Corralation between Tong Yang and Actron Technology
Assuming the 90 days trading horizon Tong Yang Industry is expected to generate 1.44 times more return on investment than Actron Technology. However, Tong Yang is 1.44 times more volatile than Actron Technology. It trades about -0.05 of its potential returns per unit of risk. Actron Technology is currently generating about -0.15 per unit of risk. If you would invest 11,050 in Tong Yang Industry on November 4, 2024 and sell it today you would lose (200.00) from holding Tong Yang Industry or give up 1.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tong Yang Industry vs. Actron Technology
Performance |
| Timeline |
| Tong Yang Industry |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Actron Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Tong Yang and Actron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tong Yang and Actron Technology
The main advantage of trading using opposite Tong Yang and Actron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Yang position performs unexpectedly, Actron Technology 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 Actron Technology will offset losses from the drop in Actron Technology's long position.The idea behind Tong Yang Industry and Actron Technology 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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