Correlation Between Tung Ho and Phison Electronics
Can any of the company-specific risk be diversified away by investing in both Tung Ho and Phison Electronics 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 Tung Ho and Phison Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tung Ho Steel and Phison Electronics, you can compare the effects of market volatilities on Tung Ho and Phison Electronics 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 Tung Ho with a short position of Phison Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tung Ho and Phison Electronics.
Diversification Opportunities for Tung Ho and Phison Electronics
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tung and Phison is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Steel and Phison Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phison Electronics and Tung Ho 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 Tung Ho Steel are associated (or correlated) with Phison Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phison Electronics has no effect on the direction of Tung Ho i.e., Tung Ho and Phison Electronics go up and down completely randomly.
Pair Corralation between Tung Ho and Phison Electronics
Assuming the 90 days trading horizon Tung Ho is expected to generate 1.59 times less return on investment than Phison Electronics. But when comparing it to its historical volatility, Tung Ho Steel is 1.81 times less risky than Phison Electronics. It trades about 0.06 of its potential returns per unit of risk. Phison Electronics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 29,733 in Phison Electronics on September 12, 2024 and sell it today you would earn a total of 15,517 from holding Phison Electronics or generate 52.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tung Ho Steel vs. Phison Electronics
Performance |
| Timeline |
| Tung Ho Steel |
| Phison Electronics |
Tung Ho and Phison Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tung Ho and Phison Electronics
The main advantage of trading using opposite Tung Ho and Phison Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tung Ho position performs unexpectedly, Phison Electronics 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 Phison Electronics will offset losses from the drop in Phison Electronics' long position.| Tung Ho vs. Tainan Spinning Co | Tung Ho vs. Lealea Enterprise Co | Tung Ho vs. China Petrochemical Development | Tung Ho vs. Ruentex Development Co |
| Phison Electronics vs. Sunny Friend Environmental | Phison Electronics vs. Ever Clear Environmental Eng | Phison Electronics vs. Yieh United Steel | Phison Electronics vs. Tung Ho Steel |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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