Correlation Between Hwa Fong and TWOWAY Communications
Can any of the company-specific risk be diversified away by investing in both Hwa Fong and TWOWAY Communications 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 Hwa Fong and TWOWAY Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hwa Fong Rubber and TWOWAY Communications, you can compare the effects of market volatilities on Hwa Fong and TWOWAY Communications 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 Hwa Fong with a short position of TWOWAY Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwa Fong and TWOWAY Communications.
Diversification Opportunities for Hwa Fong and TWOWAY Communications
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hwa and TWOWAY is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and TWOWAY Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TWOWAY Communications and Hwa Fong 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 Hwa Fong Rubber are associated (or correlated) with TWOWAY Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TWOWAY Communications has no effect on the direction of Hwa Fong i.e., Hwa Fong and TWOWAY Communications go up and down completely randomly.
Pair Corralation between Hwa Fong and TWOWAY Communications
Assuming the 90 days trading horizon Hwa Fong is expected to generate 54.31 times less return on investment than TWOWAY Communications. But when comparing it to its historical volatility, Hwa Fong Rubber is 8.01 times less risky than TWOWAY Communications. It trades about 0.03 of its potential returns per unit of risk. TWOWAY Communications is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 8,720 in TWOWAY Communications on October 30, 2024 and sell it today you would earn a total of 2,980 from holding TWOWAY Communications or generate 34.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hwa Fong Rubber vs. TWOWAY Communications
Performance |
| Timeline |
| Hwa Fong Rubber |
| TWOWAY Communications |
Hwa Fong and TWOWAY Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hwa Fong and TWOWAY Communications
The main advantage of trading using opposite Hwa Fong and TWOWAY Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hwa Fong position performs unexpectedly, TWOWAY Communications 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 TWOWAY Communications will offset losses from the drop in TWOWAY Communications' long position.| Hwa Fong vs. Kenda Rubber Industrial | Hwa Fong vs. Cheng Shin Rubber | Hwa Fong vs. Federal Corp | Hwa Fong vs. Nankang Rubber Tire |
| TWOWAY Communications vs. Accton Technology Corp | TWOWAY Communications vs. HTC Corp | TWOWAY Communications vs. Wistron NeWeb Corp | TWOWAY Communications vs. Arcadyan Technology 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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