Correlation Between TongFu Microelectronics and Anyang Iron

Can any of the company-specific risk be diversified away by investing in both TongFu Microelectronics and Anyang Iron 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 TongFu Microelectronics and Anyang Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TongFu Microelectronics Co and Anyang Iron Steel, you can compare the effects of market volatilities on TongFu Microelectronics and Anyang Iron 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 TongFu Microelectronics with a short position of Anyang Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of TongFu Microelectronics and Anyang Iron.

Diversification Opportunities for TongFu Microelectronics and Anyang Iron

0.68

Correlation Coefficient

TongFu Microelectronics  Anyang Iron

Poor diversification

The 3 months correlation between TongFu and Anyang is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding TongFu Microelectronics Co and Anyang Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anyang Iron Steel and TongFu Microelectronics 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 TongFu Microelectronics Co are associated (or correlated) with Anyang Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anyang Iron Steel has no effect on the direction of TongFu Microelectronics i.e., TongFu Microelectronics and Anyang Iron go up and down completely randomly.

Pair Corralation between TongFu Microelectronics and Anyang Iron

Assuming the 90 days trading horizon TongFu Microelectronics Co is expected to generate 1.05 times more return on investment than Anyang Iron. However, TongFu Microelectronics is 1.05 times more volatile than Anyang Iron Steel. It trades about 0.04 of its potential returns per unit of risk. Anyang Iron Steel is currently generating about 0.01 per unit of risk. If you would invest  2,518  in TongFu Microelectronics Co on October 7, 2024 and sell it today you would earn a total of  101.00  from holding TongFu Microelectronics Co or generate 4.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

TongFu Microelectronics Co  vs.  Anyang Iron Steel

TongFu Microelectronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TongFu Microelectronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TongFu Microelectronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Anyang Iron Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anyang Iron Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anyang Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TongFu Microelectronics and Anyang Iron

The main advantage of trading using opposite TongFu Microelectronics and Anyang Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TongFu Microelectronics position performs unexpectedly, Anyang Iron 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 Anyang Iron will offset losses from the drop in Anyang Iron's long position.

The idea behind TongFu Microelectronics Co and Anyang Iron Steel 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.