Correlation Between Tong Hwa and Hiwin Mikrosystem

Can any of the company-specific risk be diversified away by investing in both Tong Hwa and Hiwin Mikrosystem 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 Hwa and Hiwin Mikrosystem into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tong Hwa Synthetic Fiber and Hiwin Mikrosystem Corp, you can compare the effects of market volatilities on Tong Hwa and Hiwin Mikrosystem 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 Hwa with a short position of Hiwin Mikrosystem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hwa and Hiwin Mikrosystem.

Diversification Opportunities for Tong Hwa and Hiwin Mikrosystem

-0.15

Correlation Coefficient

Tong Hwa  Hiwin Mikrosystem

Good diversification

The 3 months correlation between Tong and Hiwin is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hwa Synthetic Fiber and Hiwin Mikrosystem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiwin Mikrosystem Corp and Tong Hwa 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 Hwa Synthetic Fiber are associated (or correlated) with Hiwin Mikrosystem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiwin Mikrosystem Corp has no effect on the direction of Tong Hwa i.e., Tong Hwa and Hiwin Mikrosystem go up and down completely randomly.

Pair Corralation between Tong Hwa and Hiwin Mikrosystem

Assuming the 90 days trading horizon Tong Hwa Synthetic Fiber is expected to under-perform the Hiwin Mikrosystem. But the stock apears to be less risky and, when comparing its historical volatility, Tong Hwa Synthetic Fiber is 1.8 times less risky than Hiwin Mikrosystem. The stock trades about -0.03 of its potential returns per unit of risk. The Hiwin Mikrosystem Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  12,000  in Hiwin Mikrosystem Corp on October 6, 2024 and sell it today you would earn a total of  2,250  from holding Hiwin Mikrosystem Corp or generate 18.75% return on investment over 90 days.

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

Tong Hwa Synthetic Fiber  vs.  Hiwin Mikrosystem Corp

Tong Hwa Synthetic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tong Hwa Synthetic Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hiwin Mikrosystem Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hiwin Mikrosystem Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hiwin Mikrosystem showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tong Hwa and Hiwin Mikrosystem

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

The idea behind Tong Hwa Synthetic Fiber and Hiwin Mikrosystem Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.