Correlation Between Tainan Spinning and Tung Ho

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

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

Diversification Opportunities for Tainan Spinning and Tung Ho

0.08

Correlation Coefficient

Tainan Spinning  Tung Ho

Significant diversification

The 3 months correlation between Tainan and Tung is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co and Tung Ho Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Textile and Tainan Spinning 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 Tainan Spinning Co are associated (or correlated) with Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Textile has no effect on the direction of Tainan Spinning i.e., Tainan Spinning and Tung Ho go up and down completely randomly.

Pair Corralation between Tainan Spinning and Tung Ho

Assuming the 90 days trading horizon Tainan Spinning Co is expected to under-perform the Tung Ho. But the stock apears to be less risky and, when comparing its historical volatility, Tainan Spinning Co is 1.62 times less risky than Tung Ho. The stock trades about -0.02 of its potential returns per unit of risk. The Tung Ho Textile is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tainan Spinning Co  vs.  Tung Ho Textile

Tainan Spinning

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tainan Spinning Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tainan Spinning is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Tainan Spinning and Tung Ho

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

The idea behind Tainan Spinning Co and Tung Ho Textile 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.