Correlation Between Tong Hwa and Information Technology
Can any of the company-specific risk be diversified away by investing in both Tong Hwa and Information Technology 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 Information Technology 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 Information Technology Total, you can compare the effects of market volatilities on Tong Hwa and Information Technology 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 Information Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hwa and Information Technology.
Diversification Opportunities for Tong Hwa and Information Technology
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Tong and Information is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hwa Synthetic Fiber and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology 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 Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Tong Hwa i.e., Tong Hwa and Information Technology go up and down completely randomly.
Pair Corralation between Tong Hwa and Information Technology
Assuming the 90 days trading horizon Tong Hwa Synthetic Fiber is expected to generate 0.85 times more return on investment than Information Technology. However, Tong Hwa Synthetic Fiber is 1.17 times less risky than Information Technology. It trades about 0.07 of its potential returns per unit of risk. Information Technology Total is currently generating about 0.04 per unit of risk. If you would invest 1,425 in Tong Hwa Synthetic Fiber on October 21, 2024 and sell it today you would earn a total of 1,370 from holding Tong Hwa Synthetic Fiber or generate 96.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Tong Hwa Synthetic Fiber vs. Information Technology Total
Performance |
Timeline |
Tong Hwa Synthetic |
Information Technology |
Tong Hwa and Information Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tong Hwa and Information Technology
The main advantage of trading using opposite Tong Hwa and Information Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Hwa position performs unexpectedly, Information Technology 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 Information Technology will offset losses from the drop in Information Technology's long position.Tong Hwa vs. Shinkong Synthetic Fiber | Tong Hwa vs. Nan Yang Dyeing | Tong Hwa vs. Tung Ho Textile | Tong Hwa vs. Tah Tong Textile |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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