Correlation Between Tai Tung and Thinking Electronic
Can any of the company-specific risk be diversified away by investing in both Tai Tung and Thinking Electronic 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 Thinking Electronic 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 Thinking Electronic Industrial, you can compare the effects of market volatilities on Tai Tung and Thinking Electronic 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 Thinking Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tai Tung and Thinking Electronic.
Diversification Opportunities for Tai Tung and Thinking Electronic
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tai and Thinking is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and Thinking Electronic Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thinking Electronic 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 Thinking Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thinking Electronic has no effect on the direction of Tai Tung i.e., Tai Tung and Thinking Electronic go up and down completely randomly.
Pair Corralation between Tai Tung and Thinking Electronic
Assuming the 90 days trading horizon Tai Tung Communication is expected to under-perform the Thinking Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Tai Tung Communication is 1.42 times less risky than Thinking Electronic. The stock trades about -0.22 of its potential returns per unit of risk. The Thinking Electronic Industrial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 15,300 in Thinking Electronic Industrial on November 5, 2024 and sell it today you would earn a total of 1,100 from holding Thinking Electronic Industrial or generate 7.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tai Tung Communication vs. Thinking Electronic Industrial
Performance |
| Timeline |
| Tai Tung Communication |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Thinking Electronic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Tai Tung and Thinking Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tai Tung and Thinking Electronic
The main advantage of trading using opposite Tai Tung and Thinking Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tai Tung position performs unexpectedly, Thinking Electronic 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 Thinking Electronic will offset losses from the drop in Thinking Electronic's long position.The idea behind Tai Tung Communication and Thinking Electronic Industrial 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.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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