Correlation Between Hong Ho and Feng Tay

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

By analyzing existing cross correlation between Hong Ho Precision and Feng Tay Enterprises, you can compare the effects of market volatilities on Hong Ho and Feng Tay 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 Hong Ho with a short position of Feng Tay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Ho and Feng Tay.

Diversification Opportunities for Hong Ho and Feng Tay

-0.45

Correlation Coefficient

Hong Ho  Feng Tay

Very good diversification

The 3 months correlation between Hong and Feng is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hong Ho Precision and Feng Tay Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feng Tay Enterprises and Hong 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 Hong Ho Precision are associated (or correlated) with Feng Tay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feng Tay Enterprises has no effect on the direction of Hong Ho i.e., Hong Ho and Feng Tay go up and down completely randomly.

Pair Corralation between Hong Ho and Feng Tay

Assuming the 90 days trading horizon Hong Ho Precision is expected to generate 1.49 times more return on investment than Feng Tay. However, Hong Ho is 1.49 times more volatile than Feng Tay Enterprises. It trades about 0.39 of its potential returns per unit of risk. Feng Tay Enterprises is currently generating about -0.01 per unit of risk. If you would invest  4,350  in Hong Ho Precision on September 5, 2024 and sell it today you would earn a total of  1,300  from holding Hong Ho Precision or generate 29.89% return on investment over 90 days.

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

Hong Ho Precision  vs.  Feng Tay Enterprises

Hong Ho Precision

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Ho Precision are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hong Ho showed solid returns over the last few months and may actually be approaching a breakup point.

Feng Tay Enterprises

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Feng Tay Enterprises are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Feng Tay 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 Hong Ho and Feng Tay

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

The idea behind Hong Ho Precision and Feng Tay Enterprises 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.