Correlation Between Integrated Electronic and Tonghua Grape

Can any of the company-specific risk be diversified away by investing in both Integrated Electronic and Tonghua Grape 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 Integrated Electronic and Tonghua Grape into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Integrated Electronic Systems and Tonghua Grape Wine, you can compare the effects of market volatilities on Integrated Electronic and Tonghua Grape 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 Integrated Electronic with a short position of Tonghua Grape. Check out your portfolio center. Please also check ongoing floating volatility patterns of Integrated Electronic and Tonghua Grape.

Diversification Opportunities for Integrated Electronic and Tonghua Grape

0.61

Correlation Coefficient

Integrated Electronic  Tonghua Grape

Poor diversification

The 3 months correlation between Integrated and Tonghua is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Integrated Electronic Systems and Tonghua Grape Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tonghua Grape Wine and Integrated Electronic 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 Integrated Electronic Systems are associated (or correlated) with Tonghua Grape. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tonghua Grape Wine has no effect on the direction of Integrated Electronic i.e., Integrated Electronic and Tonghua Grape go up and down completely randomly.

Pair Corralation between Integrated Electronic and Tonghua Grape

Assuming the 90 days trading horizon Integrated Electronic Systems is expected to generate 1.29 times more return on investment than Tonghua Grape. However, Integrated Electronic is 1.29 times more volatile than Tonghua Grape Wine. It trades about 0.0 of its potential returns per unit of risk. Tonghua Grape Wine is currently generating about -0.09 per unit of risk. If you would invest  733.00  in Integrated Electronic Systems on December 26, 2024 and sell it today you would lose (9.00) from holding Integrated Electronic Systems or give up 1.23% of portfolio value over 90 days.

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

Integrated Electronic Systems  vs.  Tonghua Grape Wine

Integrated Electronic

Risk-Adjusted Performance

Very Weak

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

Tonghua Grape Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tonghua Grape Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Integrated Electronic and Tonghua Grape

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

The idea behind Integrated Electronic Systems and Tonghua Grape Wine 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.