Correlation Between Tong Tai and Drewloong Precision
Can any of the company-specific risk be diversified away by investing in both Tong Tai and Drewloong Precision 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 Drewloong Precision 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 Drewloong Precision, you can compare the effects of market volatilities on Tong Tai and Drewloong Precision 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 Drewloong Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Tai and Drewloong Precision.
Diversification Opportunities for Tong Tai and Drewloong Precision
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tong and Drewloong is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tong Tai Machine Tool and Drewloong Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drewloong Precision 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 Drewloong Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drewloong Precision has no effect on the direction of Tong Tai i.e., Tong Tai and Drewloong Precision go up and down completely randomly.
Pair Corralation between Tong Tai and Drewloong Precision
Assuming the 90 days trading horizon Tong Tai is expected to generate 5.64 times less return on investment than Drewloong Precision. But when comparing it to its historical volatility, Tong Tai Machine Tool is 9.02 times less risky than Drewloong Precision. It trades about 0.07 of its potential returns per unit of risk. Drewloong Precision is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 14,753 in Drewloong Precision on August 31, 2024 and sell it today you would earn a total of 597.00 from holding Drewloong Precision or generate 4.05% 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. Drewloong Precision
Performance |
| Timeline |
| Tong Tai Machine |
| Drewloong Precision |
Tong Tai and Drewloong Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tong Tai and Drewloong Precision
The main advantage of trading using opposite Tong Tai and Drewloong Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Tai position performs unexpectedly, Drewloong Precision 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 Drewloong Precision will offset losses from the drop in Drewloong Precision's long position.| Tong Tai vs. BES Engineering Co | Tong Tai vs. Continental Holdings Corp | Tong Tai vs. Kee Tai Properties | Tong Tai vs. Hung Sheng Construction |
| Drewloong Precision vs. Golden Friends | Drewloong Precision vs. Sunonwealth Electric Machine | Drewloong Precision vs. Rechi Precision Co | Drewloong Precision vs. Fittech Co |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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