Correlation Between Tung Ho and Shinkong Textile

Can any of the company-specific risk be diversified away by investing in both Tung Ho and Shinkong Textile 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 Tung Ho and Shinkong Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tung Ho Textile and Shinkong Textile Co, you can compare the effects of market volatilities on Tung Ho and Shinkong Textile 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 Tung Ho with a short position of Shinkong Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tung Ho and Shinkong Textile.

Diversification Opportunities for Tung Ho and Shinkong Textile

-0.6

Correlation Coefficient

Tung Ho  Shinkong Textile

Excellent diversification

The 3 months correlation between Tung and Shinkong is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Textile and Shinkong Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Textile and Tung Ho 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 Tung Ho Textile are associated (or correlated) with Shinkong Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Textile has no effect on the direction of Tung Ho i.e., Tung Ho and Shinkong Textile go up and down completely randomly.

Pair Corralation between Tung Ho and Shinkong Textile

Assuming the 90 days trading horizon Tung Ho Textile is expected to generate 1.95 times more return on investment than Shinkong Textile. However, Tung Ho is 1.95 times more volatile than Shinkong Textile Co. It trades about 0.13 of its potential returns per unit of risk. Shinkong Textile Co is currently generating about -0.31 per unit of risk. If you would invest  2,360  in Tung Ho Textile on October 8, 2024 and sell it today you would earn a total of  125.00  from holding Tung Ho Textile or generate 5.3% return on investment over 90 days.

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

Tung Ho Textile  vs.  Shinkong Textile Co

Tung Ho Textile

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tung Ho Textile are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tung Ho may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shinkong Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinkong Textile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Tung Ho and Shinkong Textile

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

The idea behind Tung Ho Textile and Shinkong Textile 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.