Correlation Between Tang Eng and Chief Telecom
Can any of the company-specific risk be diversified away by investing in both Tang Eng and Chief Telecom 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 Chief Telecom 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 Chief Telecom, you can compare the effects of market volatilities on Tang Eng and Chief Telecom 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 Chief Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tang Eng and Chief Telecom.
Diversification Opportunities for Tang Eng and Chief Telecom
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tang and Chief is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tang Eng Iron and Chief Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chief Telecom 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 Chief Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chief Telecom has no effect on the direction of Tang Eng i.e., Tang Eng and Chief Telecom go up and down completely randomly.
Pair Corralation between Tang Eng and Chief Telecom
Assuming the 90 days trading horizon Tang Eng is expected to generate 2.48 times less return on investment than Chief Telecom. But when comparing it to its historical volatility, Tang Eng Iron is 1.94 times less risky than Chief Telecom. It trades about 0.26 of its potential returns per unit of risk. Chief Telecom is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 42,400 in Chief Telecom on November 28, 2024 and sell it today you would earn a total of 3,200 from holding Chief Telecom or generate 7.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tang Eng Iron vs. Chief Telecom
Performance |
| Timeline |
| Tang Eng Iron |
| Chief Telecom |
Tang Eng and Chief Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tang Eng and Chief Telecom
The main advantage of trading using opposite Tang Eng and Chief Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tang Eng position performs unexpectedly, Chief Telecom 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 Chief Telecom will offset losses from the drop in Chief Telecom's long position.| Tang Eng vs. ANJI Technology Co | Tang Eng vs. Shian Yih Electronic | Tang Eng vs. Etrend Hightech | Tang Eng vs. PChome Online |
| Chief Telecom vs. Sunny Friend Environmental | Chief Telecom vs. Aspeed Technology | Chief Telecom vs. Standard Foods Corp | Chief Telecom vs. Realtek Semiconductor 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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