Correlation Between Tung Ho and SanDi Properties

Can any of the company-specific risk be diversified away by investing in both Tung Ho and SanDi Properties 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 SanDi Properties 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 SanDi Properties Co, you can compare the effects of market volatilities on Tung Ho and SanDi Properties 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 SanDi Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tung Ho and SanDi Properties.

Diversification Opportunities for Tung Ho and SanDi Properties

0.24

Correlation Coefficient

Tung Ho  SanDi Properties

Modest diversification

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

Pair Corralation between Tung Ho and SanDi Properties

Assuming the 90 days trading horizon Tung Ho Textile is expected to generate 0.51 times more return on investment than SanDi Properties. However, Tung Ho Textile is 1.95 times less risky than SanDi Properties. It trades about 0.02 of its potential returns per unit of risk. SanDi Properties Co is currently generating about -0.06 per unit of risk. If you would invest  2,330  in Tung Ho Textile on September 12, 2024 and sell it today you would earn a total of  35.00  from holding Tung Ho Textile or generate 1.5% return on investment over 90 days.

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

Tung Ho Textile  vs.  SanDi Properties Co

Tung Ho Textile

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tung Ho Textile are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Tung Ho is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SanDi Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SanDi Properties 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 SanDi Properties

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

The idea behind Tung Ho Textile and SanDi Properties 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.