Correlation Between Mono Next and Tong Hua
Can any of the company-specific risk be diversified away by investing in both Mono Next and Tong Hua 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 Mono Next and Tong Hua into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mono Next Public and Tong Hua Holding, you can compare the effects of market volatilities on Mono Next and Tong Hua 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 Mono Next with a short position of Tong Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mono Next and Tong Hua.
Diversification Opportunities for Mono Next and Tong Hua
Good diversification
The 3 months correlation between Mono and Tong is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Mono Next Public and Tong Hua Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tong Hua Holding and Mono Next 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 Mono Next Public are associated (or correlated) with Tong Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tong Hua Holding has no effect on the direction of Mono Next i.e., Mono Next and Tong Hua go up and down completely randomly.
Pair Corralation between Mono Next and Tong Hua
Assuming the 90 days trading horizon Mono Next is expected to generate 8.61 times less return on investment than Tong Hua. But when comparing it to its historical volatility, Mono Next Public is 12.77 times less risky than Tong Hua. It trades about 0.07 of its potential returns per unit of risk. Tong Hua Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 143.00 in Tong Hua Holding on August 29, 2024 and sell it today you would lose (74.00) from holding Tong Hua Holding or give up 51.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mono Next Public vs. Tong Hua Holding
Performance |
| Timeline |
| Mono Next Public |
| Tong Hua Holding |
Mono Next and Tong Hua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mono Next and Tong Hua
The main advantage of trading using opposite Mono Next and Tong Hua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mono Next position performs unexpectedly, Tong Hua 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 Tong Hua will offset losses from the drop in Tong Hua's long position.| Mono Next vs. BEC World Public | Mono Next vs. Jasmine International Public | Mono Next vs. IRPC Public | Mono Next vs. Beauty Community Public |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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