Correlation Between Tong Yang and Tainan Spinning

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Can any of the company-specific risk be diversified away by investing in both Tong Yang and Tainan Spinning 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 Tong Yang and Tainan Spinning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tong Yang Industry and Tainan Spinning Co, you can compare the effects of market volatilities on Tong Yang and Tainan Spinning 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 Tong Yang with a short position of Tainan Spinning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Yang and Tainan Spinning.

Diversification Opportunities for Tong Yang and Tainan Spinning

TongTainanDiversified AwayTongTainanDiversified Away100%
0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between Tong and Tainan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tong Yang Industry and Tainan Spinning Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Spinning and Tong Yang 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 Tong Yang Industry are associated (or correlated) with Tainan Spinning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Spinning has no effect on the direction of Tong Yang i.e., Tong Yang and Tainan Spinning go up and down completely randomly.

Pair Corralation between Tong Yang and Tainan Spinning

Assuming the 90 days trading horizon Tong Yang is expected to generate 2.14 times less return on investment than Tainan Spinning. In addition to that, Tong Yang is 2.06 times more volatile than Tainan Spinning Co. It trades about 0.1 of its total potential returns per unit of risk. Tainan Spinning Co is currently generating about 0.44 per unit of volatility. If you would invest  1,365  in Tainan Spinning Co on November 27, 2024 and sell it today you would earn a total of  105.00  from holding Tainan Spinning Co or generate 7.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Tong Yang Industry  vs.  Tainan Spinning Co

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50510
JavaScript chart by amCharts 3.21.151319 1440
       Timeline  
Tong Yang Industry 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Tong Yang Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tong Yang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb106108110112114116118120
Tainan Spinning 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Tainan Spinning Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tainan Spinning is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1313.51414.51515.5

Tong Yang and Tainan Spinning Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.49-4.86-3.23-1.6-0.02711.653.324.996.66 0.10.20.30.4
JavaScript chart by amCharts 3.21.151319 1440
       Returns  

Pair Trading with Tong Yang and Tainan Spinning

The main advantage of trading using opposite Tong Yang and Tainan Spinning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Yang position performs unexpectedly, Tainan Spinning 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 Tainan Spinning will offset losses from the drop in Tainan Spinning's long position.
The idea behind Tong Yang Industry and Tainan Spinning 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.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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