Correlation Between TongFu Microelectronics and JCET Group

Can any of the company-specific risk be diversified away by investing in both TongFu Microelectronics and JCET Group 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 JCET Group 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 JCET Group Co, you can compare the effects of market volatilities on TongFu Microelectronics and JCET Group 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 JCET Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of TongFu Microelectronics and JCET Group.

Diversification Opportunities for TongFu Microelectronics and JCET Group

0.7

Correlation Coefficient

TongFu Microelectronics  JCET Group

Poor diversification

The 3 months correlation between TongFu and JCET is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding TongFu Microelectronics Co and JCET Group Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JCET Group 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 JCET Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JCET Group has no effect on the direction of TongFu Microelectronics i.e., TongFu Microelectronics and JCET Group go up and down completely randomly.

Pair Corralation between TongFu Microelectronics and JCET Group

Assuming the 90 days trading horizon TongFu Microelectronics Co is expected to under-perform the JCET Group. But the stock apears to be less risky and, when comparing its historical volatility, TongFu Microelectronics Co is 1.04 times less risky than JCET Group. The stock trades about -0.03 of its potential returns per unit of risk. The JCET Group Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,893  in JCET Group Co on December 25, 2024 and sell it today you would lose (233.00) from holding JCET Group Co or give up 5.99% of portfolio value over 90 days.

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

TongFu Microelectronics Co  vs.  JCET Group Co

TongFu Microelectronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days TongFu Microelectronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TongFu Microelectronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

JCET Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days JCET Group Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JCET Group 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 JCET Group

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

The idea behind TongFu Microelectronics Co and JCET Group Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.