Correlation Between TongFu Microelectronics and ROPEOK Technology

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

Diversification Opportunities for TongFu Microelectronics and ROPEOK Technology

0.72

Correlation Coefficient

TongFu Microelectronics  ROPEOK Technology

Poor diversification

The 3 months correlation between TongFu and ROPEOK is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding TongFu Microelectronics Co and ROPEOK Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROPEOK Technology 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 ROPEOK Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROPEOK Technology has no effect on the direction of TongFu Microelectronics i.e., TongFu Microelectronics and ROPEOK Technology go up and down completely randomly.

Pair Corralation between TongFu Microelectronics and ROPEOK Technology

Assuming the 90 days trading horizon TongFu Microelectronics is expected to generate 1.4 times less return on investment than ROPEOK Technology. But when comparing it to its historical volatility, TongFu Microelectronics Co is 1.13 times less risky than ROPEOK Technology. It trades about 0.04 of its potential returns per unit of risk. ROPEOK Technology Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  951.00  in ROPEOK Technology Group on November 29, 2024 and sell it today you would earn a total of  56.00  from holding ROPEOK Technology Group or generate 5.89% 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.  ROPEOK Technology Group

TongFu Microelectronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TongFu Microelectronics Co are ranked lower than 3 (%) 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 March 2025.

ROPEOK Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ROPEOK Technology Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ROPEOK Technology may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with TongFu Microelectronics and ROPEOK Technology

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

The idea behind TongFu Microelectronics Co and ROPEOK Technology Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.