Correlation Between Hsing Ta and Taisun Enterprise

Can any of the company-specific risk be diversified away by investing in both Hsing Ta and Taisun Enterprise 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 Hsing Ta and Taisun Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hsing Ta Cement and Taisun Enterprise Co, you can compare the effects of market volatilities on Hsing Ta and Taisun Enterprise 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 Hsing Ta with a short position of Taisun Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsing Ta and Taisun Enterprise.

Diversification Opportunities for Hsing Ta and Taisun Enterprise

0.77

Correlation Coefficient

Hsing Ta  Taisun Enterprise

Poor diversification

The 3 months correlation between Hsing and Taisun is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hsing Ta Cement and Taisun Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taisun Enterprise and Hsing Ta 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 Hsing Ta Cement are associated (or correlated) with Taisun Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taisun Enterprise has no effect on the direction of Hsing Ta i.e., Hsing Ta and Taisun Enterprise go up and down completely randomly.

Pair Corralation between Hsing Ta and Taisun Enterprise

Assuming the 90 days trading horizon Hsing Ta Cement is expected to under-perform the Taisun Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Hsing Ta Cement is 1.52 times less risky than Taisun Enterprise. The stock trades about -0.02 of its potential returns per unit of risk. The Taisun Enterprise Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,980  in Taisun Enterprise Co on December 29, 2024 and sell it today you would earn a total of  95.00  from holding Taisun Enterprise Co or generate 4.8% return on investment over 90 days.

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

Hsing Ta Cement  vs.  Taisun Enterprise Co

Hsing Ta Cement

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hsing Ta Cement has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hsing Ta is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Taisun Enterprise

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taisun Enterprise Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Taisun Enterprise is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hsing Ta and Taisun Enterprise

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

The idea behind Hsing Ta Cement and Taisun Enterprise 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.