Correlation Between Tway Air and Sam Chun

Can any of the company-specific risk be diversified away by investing in both Tway Air and Sam Chun 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 Tway Air and Sam Chun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tway Air Co and Sam Chun Dang, you can compare the effects of market volatilities on Tway Air and Sam Chun 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 Tway Air with a short position of Sam Chun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tway Air and Sam Chun.

Diversification Opportunities for Tway Air and Sam Chun

0.49

Correlation Coefficient

Tway Air  Sam Chun

Very weak diversification

The 3 months correlation between Tway and Sam is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tway Air Co and Sam Chun Dang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sam Chun Dang and Tway Air 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 Tway Air Co are associated (or correlated) with Sam Chun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sam Chun Dang has no effect on the direction of Tway Air i.e., Tway Air and Sam Chun go up and down completely randomly.

Pair Corralation between Tway Air and Sam Chun

Assuming the 90 days trading horizon Tway Air is expected to generate 4.19 times less return on investment than Sam Chun. But when comparing it to its historical volatility, Tway Air Co is 1.6 times less risky than Sam Chun. It trades about 0.02 of its potential returns per unit of risk. Sam Chun Dang is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,600,000  in Sam Chun Dang on September 13, 2024 and sell it today you would earn a total of  5,460,000  from holding Sam Chun Dang or generate 118.7% return on investment over 90 days.

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

Tway Air Co  vs.  Sam Chun Dang

Tway Air

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sam Chun Dang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sam Chun Dang has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tway Air and Sam Chun

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

The idea behind Tway Air Co and Sam Chun Dang 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.