Correlation Between Do Fluoride and TongFu Microelectronics

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

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

Diversification Opportunities for Do Fluoride and TongFu Microelectronics

0.81

Correlation Coefficient

Do Fluoride  TongFu Microelectronics

Very poor diversification

The 3 months correlation between 002407 and TongFu is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Do Fluoride Chemicals Co and TongFu Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TongFu Microelectronics and Do Fluoride 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 Do Fluoride Chemicals Co are associated (or correlated) with TongFu Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TongFu Microelectronics has no effect on the direction of Do Fluoride i.e., Do Fluoride and TongFu Microelectronics go up and down completely randomly.

Pair Corralation between Do Fluoride and TongFu Microelectronics

Assuming the 90 days trading horizon Do Fluoride Chemicals Co is expected to under-perform the TongFu Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Do Fluoride Chemicals Co is 1.43 times less risky than TongFu Microelectronics. The stock trades about -0.31 of its potential returns per unit of risk. The TongFu Microelectronics Co is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  3,148  in TongFu Microelectronics Co on October 3, 2024 and sell it today you would lose (193.00) from holding TongFu Microelectronics Co or give up 6.13% of portfolio value over 90 days.

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

Do Fluoride Chemicals Co  vs.  TongFu Microelectronics Co

Do Fluoride Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Do Fluoride Chemicals Co 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.

TongFu Microelectronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TongFu Microelectronics Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TongFu Microelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Do Fluoride and TongFu Microelectronics

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

The idea behind Do Fluoride Chemicals Co and TongFu Microelectronics 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.