Correlation Between Tong Hwa and Ligitek Electronics

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

Diversification Opportunities for Tong Hwa and Ligitek Electronics

-0.29

Correlation Coefficient

Tong Hwa  Ligitek Electronics

Very good diversification

The 3 months correlation between Tong and Ligitek is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hwa Synthetic Fiber and Ligitek Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligitek Electronics 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 Ligitek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligitek Electronics has no effect on the direction of Tong Hwa i.e., Tong Hwa and Ligitek Electronics go up and down completely randomly.

Pair Corralation between Tong Hwa and Ligitek Electronics

Assuming the 90 days trading horizon Tong Hwa Synthetic Fiber is expected to under-perform the Ligitek Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Tong Hwa Synthetic Fiber is 2.84 times less risky than Ligitek Electronics. The stock trades about -0.22 of its potential returns per unit of risk. The Ligitek Electronics Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,300  in Ligitek Electronics Co on October 23, 2024 and sell it today you would earn a total of  130.00  from holding Ligitek Electronics Co or generate 2.45% 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.  Ligitek Electronics Co

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 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.

Ligitek Electronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ligitek Electronics Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ligitek Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tong Hwa and Ligitek Electronics

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

The idea behind Tong Hwa Synthetic Fiber and Ligitek Electronics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.