Correlation Between Tah Hsin and San Fang

Can any of the company-specific risk be diversified away by investing in both Tah Hsin and San Fang 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 Tah Hsin and San Fang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tah Hsin Industrial and San Fang Chemical, you can compare the effects of market volatilities on Tah Hsin and San Fang 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 Tah Hsin with a short position of San Fang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tah Hsin and San Fang.

Diversification Opportunities for Tah Hsin and San Fang

0.24

Correlation Coefficient

Tah Hsin  San Fang

Modest diversification

The 3 months correlation between Tah and San is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Tah Hsin Industrial and San Fang Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Fang Chemical and Tah Hsin 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 Tah Hsin Industrial are associated (or correlated) with San Fang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Fang Chemical has no effect on the direction of Tah Hsin i.e., Tah Hsin and San Fang go up and down completely randomly.

Pair Corralation between Tah Hsin and San Fang

Assuming the 90 days trading horizon Tah Hsin Industrial is expected to under-perform the San Fang. But the stock apears to be less risky and, when comparing its historical volatility, Tah Hsin Industrial is 4.65 times less risky than San Fang. The stock trades about -0.01 of its potential returns per unit of risk. The San Fang Chemical is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,085  in San Fang Chemical on October 7, 2024 and sell it today you would earn a total of  1,665  from holding San Fang Chemical or generate 79.86% return on investment over 90 days.

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

Tah Hsin Industrial  vs.  San Fang Chemical

Tah Hsin Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

San Fang Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Fang Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, San Fang 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 Tah Hsin and San Fang

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

The idea behind Tah Hsin Industrial and San Fang Chemical 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.