Correlation Between China and TYC Brother
Can any of the company-specific risk be diversified away by investing in both China and TYC Brother 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 China and TYC Brother into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Motor Corp and TYC Brother Industrial, you can compare the effects of market volatilities on China and TYC Brother 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 China with a short position of TYC Brother. Check out your portfolio center. Please also check ongoing floating volatility patterns of China and TYC Brother.
Diversification Opportunities for China and TYC Brother
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and TYC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding China Motor Corp and TYC Brother Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TYC Brother Industrial and China 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 China Motor Corp are associated (or correlated) with TYC Brother. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TYC Brother Industrial has no effect on the direction of China i.e., China and TYC Brother go up and down completely randomly.
Pair Corralation between China and TYC Brother
Assuming the 90 days trading horizon China is expected to generate 1.8 times less return on investment than TYC Brother. In addition to that, China is 1.01 times more volatile than TYC Brother Industrial. It trades about 0.04 of its total potential returns per unit of risk. TYC Brother Industrial is currently generating about 0.08 per unit of volatility. If you would invest 2,900 in TYC Brother Industrial on November 30, 2024 and sell it today you would earn a total of 3,470 from holding TYC Brother Industrial or generate 119.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Motor Corp vs. TYC Brother Industrial
Performance |
| Timeline |
| China Motor Corp |
| TYC Brother Industrial |
China and TYC Brother Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China and TYC Brother
The main advantage of trading using opposite China and TYC Brother positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China position performs unexpectedly, TYC Brother 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 TYC Brother will offset losses from the drop in TYC Brother's long position.| China vs. Yulon Motor Co | China vs. Nan Ya Plastics | China vs. Cheng Shin Rubber | China vs. Far Eastern New |
| TYC Brother vs. Tong Yang Industry | TYC Brother vs. Ta Yih Industrial | TYC Brother vs. Basso Industry Corp | TYC Brother vs. China Motor 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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