Correlation Between Tong Tai and Lee Chi
Can any of the company-specific risk be diversified away by investing in both Tong Tai and Lee Chi 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 Tong Tai and Lee Chi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tong Tai Machine Tool and Lee Chi Enterprises, you can compare the effects of market volatilities on Tong Tai and Lee Chi 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 Tong Tai with a short position of Lee Chi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Tai and Lee Chi.
Diversification Opportunities for Tong Tai and Lee Chi
Poor diversification
The 3 months correlation between Tong and Lee is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tong Tai Machine Tool and Lee Chi Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lee Chi Enterprises and Tong Tai 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 Tong Tai Machine Tool are associated (or correlated) with Lee Chi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lee Chi Enterprises has no effect on the direction of Tong Tai i.e., Tong Tai and Lee Chi go up and down completely randomly.
Pair Corralation between Tong Tai and Lee Chi
Assuming the 90 days trading horizon Tong Tai Machine Tool is expected to generate 2.72 times more return on investment than Lee Chi. However, Tong Tai is 2.72 times more volatile than Lee Chi Enterprises. It trades about 0.08 of its potential returns per unit of risk. Lee Chi Enterprises is currently generating about -0.09 per unit of risk. If you would invest 2,395 in Tong Tai Machine Tool on September 3, 2024 and sell it today you would earn a total of 855.00 from holding Tong Tai Machine Tool or generate 35.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tong Tai Machine Tool vs. Lee Chi Enterprises
Performance |
| Timeline |
| Tong Tai Machine |
| Lee Chi Enterprises |
Tong Tai and Lee Chi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tong Tai and Lee Chi
The main advantage of trading using opposite Tong Tai and Lee Chi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Tai position performs unexpectedly, Lee Chi 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 Lee Chi will offset losses from the drop in Lee Chi's long position.| Tong Tai vs. Universal Microelectronics Co | Tong Tai vs. AVerMedia Technologies | Tong Tai vs. Symtek Automation Asia | Tong Tai vs. WiseChip Semiconductor |
| Lee Chi vs. Tainan Spinning Co | Lee Chi vs. Chia Her Industrial | Lee Chi vs. WiseChip Semiconductor | Lee Chi vs. Novatek Microelectronics 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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