Correlation Between Tong Hwa and Johnson Chemical
Can any of the company-specific risk be diversified away by investing in both Tong Hwa and Johnson Chemical 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 Johnson Chemical 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 Johnson Chemical Pharmaceutical, you can compare the effects of market volatilities on Tong Hwa and Johnson Chemical 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 Johnson Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hwa and Johnson Chemical.
Diversification Opportunities for Tong Hwa and Johnson Chemical
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tong and Johnson is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hwa Synthetic Fiber and Johnson Chemical Pharmaceutica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Chemical Pha 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 Johnson Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Chemical Pha has no effect on the direction of Tong Hwa i.e., Tong Hwa and Johnson Chemical go up and down completely randomly.
Pair Corralation between Tong Hwa and Johnson Chemical
Assuming the 90 days trading horizon Tong Hwa Synthetic Fiber is expected to under-perform the Johnson Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Tong Hwa Synthetic Fiber is 1.13 times less risky than Johnson Chemical. The stock trades about -0.22 of its potential returns per unit of risk. The Johnson Chemical Pharmaceutical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 7,160 in Johnson Chemical Pharmaceutical on October 23, 2024 and sell it today you would earn a total of 30.00 from holding Johnson Chemical Pharmaceutical or generate 0.42% 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. Johnson Chemical Pharmaceutica
Performance |
| Timeline |
| Tong Hwa Synthetic |
| Johnson Chemical Pha |
Tong Hwa and Johnson Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tong Hwa and Johnson Chemical
The main advantage of trading using opposite Tong Hwa and Johnson Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Hwa position performs unexpectedly, Johnson Chemical 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 Johnson Chemical will offset losses from the drop in Johnson Chemical'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 |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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