Correlation Between Tai Tung and I Jang
Can any of the company-specific risk be diversified away by investing in both Tai Tung and I Jang 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 I Jang 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 I Jang Industrial, you can compare the effects of market volatilities on Tai Tung and I Jang 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 I Jang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tai Tung and I Jang.
Diversification Opportunities for Tai Tung and I Jang
Very good diversification
The 3 months correlation between Tai and 8342 is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and I Jang Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Jang Industrial 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 I Jang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Jang Industrial has no effect on the direction of Tai Tung i.e., Tai Tung and I Jang go up and down completely randomly.
Pair Corralation between Tai Tung and I Jang
Assuming the 90 days trading horizon Tai Tung Communication is expected to under-perform the I Jang. In addition to that, Tai Tung is 2.08 times more volatile than I Jang Industrial. It trades about -0.02 of its total potential returns per unit of risk. I Jang Industrial is currently generating about 0.41 per unit of volatility. If you would invest 8,840 in I Jang Industrial on November 8, 2024 and sell it today you would earn a total of 460.00 from holding I Jang Industrial or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tai Tung Communication vs. I Jang Industrial
Performance |
| Timeline |
| Tai Tung Communication |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| I Jang Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Tai Tung and I Jang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tai Tung and I Jang
The main advantage of trading using opposite Tai Tung and I Jang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tai Tung position performs unexpectedly, I Jang 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 I Jang will offset losses from the drop in I Jang's long position.The idea behind Tai Tung Communication and I Jang 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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