Correlation Between Test Rite and Tainan Spinning
Can any of the company-specific risk be diversified away by investing in both Test Rite and Tainan Spinning 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 Test Rite and Tainan Spinning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Test Rite International and Tainan Spinning Co, you can compare the effects of market volatilities on Test Rite and Tainan Spinning 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 Test Rite with a short position of Tainan Spinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Test Rite and Tainan Spinning.
Diversification Opportunities for Test Rite and Tainan Spinning
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Test and Tainan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Test Rite International and Tainan Spinning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Spinning and Test Rite 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 Test Rite International are associated (or correlated) with Tainan Spinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Spinning has no effect on the direction of Test Rite i.e., Test Rite and Tainan Spinning go up and down completely randomly.
Pair Corralation between Test Rite and Tainan Spinning
Assuming the 90 days trading horizon Test Rite International is expected to generate 0.44 times more return on investment than Tainan Spinning. However, Test Rite International is 2.29 times less risky than Tainan Spinning. It trades about 0.01 of its potential returns per unit of risk. Tainan Spinning Co is currently generating about -0.01 per unit of risk. If you would invest 1,975 in Test Rite International on September 13, 2024 and sell it today you would earn a total of 30.00 from holding Test Rite International or generate 1.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Test Rite International vs. Tainan Spinning Co
Performance |
| Timeline |
| Test Rite International |
| Tainan Spinning |
Test Rite and Tainan Spinning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Test Rite and Tainan Spinning
The main advantage of trading using opposite Test Rite and Tainan Spinning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Test Rite position performs unexpectedly, Tainan Spinning 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 Tainan Spinning will offset losses from the drop in Tainan Spinning's long position.| Test Rite vs. President Chain Store | Test Rite vs. Far Eastern Department | Test Rite vs. Mercuries Associates Holding | Test Rite vs. China Motor Corp |
| Tainan Spinning vs. Lealea Enterprise Co | Tainan Spinning vs. China Petrochemical Development | Tainan Spinning vs. Li Peng Enterprise | Tainan Spinning vs. Oriental Union Chemical |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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