Correlation Between Tong Hwa and FDC International
Can any of the company-specific risk be diversified away by investing in both Tong Hwa and FDC International 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 Hwa and FDC International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tong Hwa Synthetic Fiber and FDC International Hotels, you can compare the effects of market volatilities on Tong Hwa and FDC International 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 Hwa with a short position of FDC International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hwa and FDC International.
Diversification Opportunities for Tong Hwa and FDC International
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tong and FDC is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hwa Synthetic Fiber and FDC International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDC International Hotels and Tong Hwa 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 Hwa Synthetic Fiber are associated (or correlated) with FDC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDC International Hotels has no effect on the direction of Tong Hwa i.e., Tong Hwa and FDC International go up and down completely randomly.
Pair Corralation between Tong Hwa and FDC International
Assuming the 90 days trading horizon Tong Hwa Synthetic Fiber is expected to under-perform the FDC International. But the stock apears to be less risky and, when comparing its historical volatility, Tong Hwa Synthetic Fiber is 1.93 times less risky than FDC International. The stock trades about -0.22 of its potential returns per unit of risk. The FDC International Hotels is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,070 in FDC International Hotels on October 23, 2024 and sell it today you would earn a total of 200.00 from holding FDC International Hotels or generate 3.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tong Hwa Synthetic Fiber vs. FDC International Hotels
Performance |
| Timeline |
| Tong Hwa Synthetic |
| FDC International Hotels |
Tong Hwa and FDC International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tong Hwa and FDC International
The main advantage of trading using opposite Tong Hwa and FDC International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Hwa position performs unexpectedly, FDC International 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 FDC International will offset losses from the drop in FDC International's long position.| Tong Hwa vs. Shinkong Synthetic Fiber | Tong Hwa vs. Nan Yang Dyeing | Tong Hwa vs. Tung Ho Textile | Tong Hwa vs. Tah Tong Textile |
| FDC International vs. Formosa International Hotels | FDC International vs. My Humble House | FDC International vs. Wanhwa Enterprise Co | FDC International vs. Gourmet Master Co |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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