Correlation Between Tainan Spinning and Tung Ho
Can any of the company-specific risk be diversified away by investing in both Tainan Spinning and Tung Ho 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 Tainan Spinning and Tung Ho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tainan Spinning Co and Tung Ho Steel, you can compare the effects of market volatilities on Tainan Spinning and Tung Ho 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 Tainan Spinning with a short position of Tung Ho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and Tung Ho.
Diversification Opportunities for Tainan Spinning and Tung Ho
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tainan and Tung is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Tung Ho Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Steel and Tainan Spinning 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 Tainan Spinning Co are associated (or correlated) with Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Steel has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Tung Ho go up and down completely randomly.
Pair Corralation between Tainan Spinning and Tung Ho
Assuming the 90 days trading horizon Tainan Spinning Co is expected to under-perform the Tung Ho. In addition to that, Tainan Spinning is 1.12 times more volatile than Tung Ho Steel. It trades about -0.01 of its total potential returns per unit of risk. Tung Ho Steel is currently generating about 0.06 per unit of volatility. If you would invest 5,270 in Tung Ho Steel on September 12, 2024 and sell it today you would earn a total of 1,890 from holding Tung Ho Steel or generate 35.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tainan Spinning Co vs. Tung Ho Steel
Performance |
| Timeline |
| Tainan Spinning |
| Tung Ho Steel |
Tainan Spinning and Tung Ho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tainan Spinning and Tung Ho
The main advantage of trading using opposite Tainan Spinning and Tung Ho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainan Spinning position performs unexpectedly, Tung Ho 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 Tung Ho will offset losses from the drop in Tung Ho's long position.| Tainan Spinning vs. Lealea Enterprise Co | Tainan Spinning vs. China Petrochemical Development | Tainan Spinning vs. Li Peng Enterprise | Tainan Spinning vs. Oriental Union Chemical |
| Tung Ho vs. Tainan Spinning Co | Tung Ho vs. Lealea Enterprise Co | Tung Ho vs. China Petrochemical Development | Tung Ho vs. Ruentex Development 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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