Correlation Between Tong Hsing and Greatek Electronics
Can any of the company-specific risk be diversified away by investing in both Tong Hsing and Greatek Electronics 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 Hsing and Greatek Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tong Hsing Electronic and Greatek Electronics, you can compare the effects of market volatilities on Tong Hsing and Greatek Electronics 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 Hsing with a short position of Greatek Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hsing and Greatek Electronics.
Diversification Opportunities for Tong Hsing and Greatek Electronics
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tong and Greatek is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hsing Electronic and Greatek Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greatek Electronics and Tong Hsing 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 Hsing Electronic are associated (or correlated) with Greatek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greatek Electronics has no effect on the direction of Tong Hsing i.e., Tong Hsing and Greatek Electronics go up and down completely randomly.
Pair Corralation between Tong Hsing and Greatek Electronics
Assuming the 90 days trading horizon Tong Hsing Electronic is expected to under-perform the Greatek Electronics. In addition to that, Tong Hsing is 1.44 times more volatile than Greatek Electronics. It trades about -0.05 of its total potential returns per unit of risk. Greatek Electronics is currently generating about -0.05 per unit of volatility. If you would invest 6,300 in Greatek Electronics on September 1, 2024 and sell it today you would lose (630.00) from holding Greatek Electronics or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Tong Hsing Electronic vs. Greatek Electronics
Performance |
| Timeline |
| Tong Hsing Electronic |
| Greatek Electronics |
Tong Hsing and Greatek Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tong Hsing and Greatek Electronics
The main advantage of trading using opposite Tong Hsing and Greatek Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Hsing position performs unexpectedly, Greatek Electronics 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 Greatek Electronics will offset losses from the drop in Greatek Electronics' long position.The idea behind Tong Hsing Electronic and Greatek Electronics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Greatek Electronics vs. King Yuan Electronics | Greatek Electronics vs. Powertech Technology | Greatek Electronics vs. Realtek Semiconductor Corp | Greatek Electronics vs. Elan 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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