Correlation Between Hsing Ta and Tsang Yow

Can any of the company-specific risk be diversified away by investing in both Hsing Ta and Tsang Yow 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 Tsang Yow 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 Tsang Yow Industrial, you can compare the effects of market volatilities on Hsing Ta and Tsang Yow 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 Tsang Yow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsing Ta and Tsang Yow.

Diversification Opportunities for Hsing Ta and Tsang Yow

0.56

Correlation Coefficient

Hsing Ta  Tsang Yow

Very weak diversification

The 3 months correlation between Hsing and Tsang is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hsing Ta Cement and Tsang Yow Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsang Yow Industrial 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 Tsang Yow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsang Yow Industrial has no effect on the direction of Hsing Ta i.e., Hsing Ta and Tsang Yow go up and down completely randomly.

Pair Corralation between Hsing Ta and Tsang Yow

Assuming the 90 days trading horizon Hsing Ta is expected to generate 1.41 times less return on investment than Tsang Yow. But when comparing it to its historical volatility, Hsing Ta Cement is 2.39 times less risky than Tsang Yow. It trades about 0.03 of its potential returns per unit of risk. Tsang Yow Industrial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,505  in Tsang Yow Industrial on September 5, 2024 and sell it today you would earn a total of  255.00  from holding Tsang Yow Industrial or generate 10.18% return on investment over 90 days.

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

Hsing Ta Cement  vs.  Tsang Yow Industrial

Hsing Ta Cement

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hsing Ta Cement are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Tsang Yow Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tsang Yow Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Tsang Yow 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 Tsang Yow

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

The idea behind Hsing Ta Cement and Tsang Yow Industrial 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.