Correlation Between Hong Tai and Ta Ya
Can any of the company-specific risk be diversified away by investing in both Hong Tai and Ta Ya 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 Hong Tai and Ta Ya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Tai Electric and Ta Ya Electric, you can compare the effects of market volatilities on Hong Tai and Ta Ya 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 Hong Tai with a short position of Ta Ya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Tai and Ta Ya.
Diversification Opportunities for Hong Tai and Ta Ya
Very weak diversification
The 3 months correlation between Hong and 1609 is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hong Tai Electric and Ta Ya Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Ya Electric and Hong Tai 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 Hong Tai Electric are associated (or correlated) with Ta Ya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Ya Electric has no effect on the direction of Hong Tai i.e., Hong Tai and Ta Ya go up and down completely randomly.
Pair Corralation between Hong Tai and Ta Ya
Assuming the 90 days trading horizon Hong Tai is expected to generate 1.11 times less return on investment than Ta Ya. But when comparing it to its historical volatility, Hong Tai Electric is 1.1 times less risky than Ta Ya. It trades about 0.08 of its potential returns per unit of risk. Ta Ya Electric is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,054 in Ta Ya Electric on August 30, 2024 and sell it today you would earn a total of 2,546 from holding Ta Ya Electric or generate 123.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Hong Tai Electric vs. Ta Ya Electric
Performance |
| Timeline |
| Hong Tai Electric |
| Ta Ya Electric |
Hong Tai and Ta Ya Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Tai and Ta Ya
The main advantage of trading using opposite Hong Tai and Ta Ya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Tai position performs unexpectedly, Ta Ya 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 Ta Ya will offset losses from the drop in Ta Ya's long position.| Hong Tai vs. Ta Ya Electric | Hong Tai vs. Hua Eng Wire | Hong Tai vs. Walsin Lihwa Corp | Hong Tai vs. Sampo Corp |
| Ta Ya vs. Yulon Motor Co | Ta Ya vs. Far Eastern Department | Ta Ya vs. China Steel Corp | Ta Ya vs. Chang Hwa Commercial |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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