Correlation Between Tang Eng and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Tang Eng and Chung Hwa 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 Tang Eng and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tang Eng Iron and Chung Hwa Chemical, you can compare the effects of market volatilities on Tang Eng and Chung Hwa 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 Tang Eng with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tang Eng and Chung Hwa.
Diversification Opportunities for Tang Eng and Chung Hwa
Significant diversification
The 3 months correlation between Tang and Chung is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Tang Eng Iron and Chung Hwa Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Chemical and Tang Eng 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 Tang Eng Iron are associated (or correlated) with Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Chemical has no effect on the direction of Tang Eng i.e., Tang Eng and Chung Hwa go up and down completely randomly.
Pair Corralation between Tang Eng and Chung Hwa
Assuming the 90 days trading horizon Tang Eng Iron is expected to generate 0.33 times more return on investment than Chung Hwa. However, Tang Eng Iron is 3.03 times less risky than Chung Hwa. It trades about 0.05 of its potential returns per unit of risk. Chung Hwa Chemical is currently generating about -0.13 per unit of risk. If you would invest 3,285 in Tang Eng Iron on September 1, 2024 and sell it today you would earn a total of 30.00 from holding Tang Eng Iron or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tang Eng Iron vs. Chung Hwa Chemical
Performance |
| Timeline |
| Tang Eng Iron |
| Chung Hwa Chemical |
Tang Eng and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tang Eng and Chung Hwa
The main advantage of trading using opposite Tang Eng and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tang Eng position performs unexpectedly, Chung Hwa 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 Chung Hwa will offset losses from the drop in Chung Hwa's long position.| Tang Eng vs. Basso Industry Corp | Tang Eng vs. Chung Hsin Electric Machinery | Tang Eng vs. TYC Brother Industrial | Tang Eng vs. TECO Electric Machinery |
| Chung Hwa vs. Oriental Union Chemical | Chung Hwa vs. Everlight Chemical Industrial | Chung Hwa vs. Formosan Union Chemical | Chung Hwa vs. Sesoda Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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