Correlation Between TMP Steel and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both TMP Steel and Chung Hwa 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 TMP Steel and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TMP Steel and Chung Hwa Chemical, you can compare the effects of market volatilities on TMP Steel and Chung Hwa 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 TMP Steel with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMP Steel and Chung Hwa.
Diversification Opportunities for TMP Steel and Chung Hwa
Weak diversification
The 3 months correlation between TMP and Chung is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding TMP Steel and Chung Hwa Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Chemical and TMP Steel 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 TMP Steel are associated (or correlated) with Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Chemical has no effect on the direction of TMP Steel i.e., TMP Steel and Chung Hwa go up and down completely randomly.
Pair Corralation between TMP Steel and Chung Hwa
Assuming the 90 days trading horizon TMP Steel is expected to generate 0.55 times more return on investment than Chung Hwa. However, TMP Steel is 1.82 times less risky than Chung Hwa. It trades about -0.15 of its potential returns per unit of risk. Chung Hwa Chemical is currently generating about -0.13 per unit of risk. If you would invest 2,965 in TMP Steel on September 1, 2024 and sell it today you would lose (135.00) from holding TMP Steel or give up 4.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TMP Steel vs. Chung Hwa Chemical
Performance |
| Timeline |
| TMP Steel |
| Chung Hwa Chemical |
TMP Steel and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TMP Steel and Chung Hwa
The main advantage of trading using opposite TMP Steel and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMP Steel position performs unexpectedly, Chung Hwa 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 Chung Hwa will offset losses from the drop in Chung Hwa's long position.| TMP Steel vs. Sunspring Metal Corp | TMP Steel vs. Microelectronics Technology | TMP Steel vs. Sun Max Tech | TMP Steel vs. United Radiant Technology |
| Chung Hwa vs. Oriental Union Chemical | Chung Hwa vs. Everlight Chemical Industrial | Chung Hwa vs. Formosan Union Chemical | Chung Hwa vs. Sesoda 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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