Correlation Between InnoTherapy and Tongyang
Can any of the company-specific risk be diversified away by investing in both InnoTherapy and Tongyang 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 InnoTherapy and Tongyang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InnoTherapy and Tongyang, you can compare the effects of market volatilities on InnoTherapy and Tongyang 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 InnoTherapy with a short position of Tongyang. Check out your portfolio center. Please also check ongoing floating volatility patterns of InnoTherapy and Tongyang.
Diversification Opportunities for InnoTherapy and Tongyang
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between InnoTherapy and Tongyang is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding InnoTherapy and Tongyang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongyang and InnoTherapy 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 InnoTherapy are associated (or correlated) with Tongyang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongyang has no effect on the direction of InnoTherapy i.e., InnoTherapy and Tongyang go up and down completely randomly.
Pair Corralation between InnoTherapy and Tongyang
Assuming the 90 days trading horizon InnoTherapy is expected to under-perform the Tongyang. But the stock apears to be less risky and, when comparing its historical volatility, InnoTherapy is 3.44 times less risky than Tongyang. The stock trades about -0.12 of its potential returns per unit of risk. The Tongyang is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 452,000 in Tongyang on August 30, 2024 and sell it today you would lose (31,500) from holding Tongyang or give up 6.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.56% |
| Values | Daily Returns |
InnoTherapy vs. Tongyang
Performance |
| Timeline |
| InnoTherapy |
| Tongyang |
InnoTherapy and Tongyang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InnoTherapy and Tongyang
The main advantage of trading using opposite InnoTherapy and Tongyang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InnoTherapy position performs unexpectedly, Tongyang 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 Tongyang will offset losses from the drop in Tongyang's long position.| InnoTherapy vs. AnterogenCoLtd | InnoTherapy vs. Busan Industrial Co | InnoTherapy vs. Busan Ind | InnoTherapy vs. Shinhan WTI Futures |
| Tongyang vs. LG Household Healthcare | Tongyang vs. SK Chemicals Co | Tongyang vs. InnoTherapy | Tongyang vs. Digital Multimedia Technology |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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