Correlation Between Eternal Materials and Tung Thih
Can any of the company-specific risk be diversified away by investing in both Eternal Materials and Tung Thih 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 Eternal Materials and Tung Thih into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eternal Materials Co and Tung Thih Electronic, you can compare the effects of market volatilities on Eternal Materials and Tung Thih 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 Eternal Materials with a short position of Tung Thih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eternal Materials and Tung Thih.
Diversification Opportunities for Eternal Materials and Tung Thih
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eternal and Tung is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Materials Co and Tung Thih Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Thih Electronic and Eternal Materials 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 Eternal Materials Co are associated (or correlated) with Tung Thih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Thih Electronic has no effect on the direction of Eternal Materials i.e., Eternal Materials and Tung Thih go up and down completely randomly.
Pair Corralation between Eternal Materials and Tung Thih
Assuming the 90 days trading horizon Eternal Materials Co is expected to under-perform the Tung Thih. But the stock apears to be less risky and, when comparing its historical volatility, Eternal Materials Co is 50.06 times less risky than Tung Thih. The stock trades about -0.01 of its potential returns per unit of risk. The Tung Thih Electronic is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 14,175 in Tung Thih Electronic on November 29, 2024 and sell it today you would lose (5,275) from holding Tung Thih Electronic or give up 37.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Eternal Materials Co vs. Tung Thih Electronic
Performance |
| Timeline |
| Eternal Materials |
| Tung Thih Electronic |
Eternal Materials and Tung Thih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eternal Materials and Tung Thih
The main advantage of trading using opposite Eternal Materials and Tung Thih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eternal Materials position performs unexpectedly, Tung Thih 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 Thih will offset losses from the drop in Tung Thih's long position.| Eternal Materials vs. Chung Hwa Chemical | Eternal Materials vs. China Man Made Fiber | Eternal Materials vs. Sesoda Corp | Eternal Materials vs. Everlight Chemical Industrial |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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