Correlation Between Transcend Information and Tehmag Foods
Can any of the company-specific risk be diversified away by investing in both Transcend Information and Tehmag Foods 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 Transcend Information and Tehmag Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transcend Information and Tehmag Foods, you can compare the effects of market volatilities on Transcend Information and Tehmag Foods 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 Transcend Information with a short position of Tehmag Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transcend Information and Tehmag Foods.
Diversification Opportunities for Transcend Information and Tehmag Foods
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Transcend and Tehmag is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Transcend Information and Tehmag Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tehmag Foods and Transcend Information 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 Transcend Information are associated (or correlated) with Tehmag Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tehmag Foods has no effect on the direction of Transcend Information i.e., Transcend Information and Tehmag Foods go up and down completely randomly.
Pair Corralation between Transcend Information and Tehmag Foods
Assuming the 90 days trading horizon Transcend Information is expected to under-perform the Tehmag Foods. In addition to that, Transcend Information is 3.3 times more volatile than Tehmag Foods. It trades about -0.13 of its total potential returns per unit of risk. Tehmag Foods is currently generating about -0.02 per unit of volatility. If you would invest 30,400 in Tehmag Foods on September 5, 2024 and sell it today you would lose (50.00) from holding Tehmag Foods or give up 0.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transcend Information vs. Tehmag Foods
Performance |
| Timeline |
| Transcend Information |
| Tehmag Foods |
Transcend Information and Tehmag Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transcend Information and Tehmag Foods
The main advantage of trading using opposite Transcend Information and Tehmag Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transcend Information position performs unexpectedly, Tehmag Foods 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 Tehmag Foods will offset losses from the drop in Tehmag Foods' long position.| Transcend Information vs. Taiwan Semiconductor Manufacturing | Transcend Information vs. Yang Ming Marine | Transcend Information vs. AU Optronics | Transcend Information vs. Nan Ya Plastics |
| Tehmag Foods vs. Uni President Enterprises Corp | Tehmag Foods vs. Lien Hwa Industrial | Tehmag Foods vs. Great Wall Enterprise | Tehmag Foods vs. Standard Foods 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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