Correlation Between Tai Tung and Chung Fu
Can any of the company-specific risk be diversified away by investing in both Tai Tung and Chung Fu 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 Tai Tung and Chung Fu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tai Tung Communication and Chung Fu Tex International, you can compare the effects of market volatilities on Tai Tung and Chung Fu 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 Tai Tung with a short position of Chung Fu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tai Tung and Chung Fu.
Diversification Opportunities for Tai Tung and Chung Fu
Very good diversification
The 3 months correlation between Tai and Chung is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and Chung Fu Tex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Fu Tex and Tai Tung 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 Tai Tung Communication are associated (or correlated) with Chung Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Fu Tex has no effect on the direction of Tai Tung i.e., Tai Tung and Chung Fu go up and down completely randomly.
Pair Corralation between Tai Tung and Chung Fu
Assuming the 90 days trading horizon Tai Tung Communication is expected to generate 0.96 times more return on investment than Chung Fu. However, Tai Tung Communication is 1.05 times less risky than Chung Fu. It trades about 0.06 of its potential returns per unit of risk. Chung Fu Tex International is currently generating about 0.01 per unit of risk. If you would invest 1,540 in Tai Tung Communication on August 26, 2024 and sell it today you would earn a total of 1,185 from holding Tai Tung Communication or generate 76.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.58% |
| Values | Daily Returns |
Tai Tung Communication vs. Chung Fu Tex International
Performance |
| Timeline |
| Tai Tung Communication |
| Chung Fu Tex |
Tai Tung and Chung Fu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tai Tung and Chung Fu
The main advantage of trading using opposite Tai Tung and Chung Fu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tai Tung position performs unexpectedly, Chung Fu 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 Fu will offset losses from the drop in Chung Fu's long position.| Tai Tung vs. Zinwell | Tai Tung vs. Mercuries Life Insurance | Tai Tung vs. Darwin Precisions Corp | Tai Tung vs. Jinli Group Holdings |
| Chung Fu vs. Chunghwa Telecom Co | Chung Fu vs. Tai Tung Communication | Chung Fu vs. Sunspring Metal Corp | Chung Fu vs. Ambassador Hotel |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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