Correlation Between Tongyu Communication and Empyrean Technology

Can any of the company-specific risk be diversified away by investing in both Tongyu Communication and Empyrean 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 Tongyu Communication and Empyrean Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tongyu Communication and Empyrean Technology Co, you can compare the effects of market volatilities on Tongyu Communication and Empyrean 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 Tongyu Communication with a short position of Empyrean Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tongyu Communication and Empyrean Technology.

Diversification Opportunities for Tongyu Communication and Empyrean Technology

0.46

Correlation Coefficient

Tongyu Communication  Empyrean Technology

Very weak diversification

The 3 months correlation between Tongyu and Empyrean is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Tongyu Communication and Empyrean Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empyrean Technology and Tongyu Communication 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 Tongyu Communication are associated (or correlated) with Empyrean Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empyrean Technology has no effect on the direction of Tongyu Communication i.e., Tongyu Communication and Empyrean Technology go up and down completely randomly.

Pair Corralation between Tongyu Communication and Empyrean Technology

Assuming the 90 days trading horizon Tongyu Communication is expected to generate 0.92 times more return on investment than Empyrean Technology. However, Tongyu Communication is 1.09 times less risky than Empyrean Technology. It trades about -0.06 of its potential returns per unit of risk. Empyrean Technology Co is currently generating about -0.07 per unit of risk. If you would invest  1,572  in Tongyu Communication on December 30, 2024 and sell it today you would lose (157.00) from holding Tongyu Communication or give up 9.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Tongyu Communication  vs.  Empyrean Technology Co

Tongyu Communication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tongyu Communication 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.

Empyrean Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empyrean Technology 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.

Pair Trading with Tongyu Communication and Empyrean Technology

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

The idea behind Tongyu Communication and Empyrean Technology 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.