Correlation Between Nien Hsing and Ton Yi

Can any of the company-specific risk be diversified away by investing in both Nien Hsing and Ton Yi 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 Nien Hsing and Ton Yi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nien Hsing Textile and Ton Yi Industrial, you can compare the effects of market volatilities on Nien Hsing and Ton Yi 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 Nien Hsing with a short position of Ton Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nien Hsing and Ton Yi.

Diversification Opportunities for Nien Hsing and Ton Yi

0.63

Correlation Coefficient

Nien Hsing  Ton Yi

Poor diversification

The 3 months correlation between Nien and Ton is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Nien Hsing Textile and Ton Yi Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ton Yi Industrial and Nien Hsing 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 Nien Hsing Textile are associated (or correlated) with Ton Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ton Yi Industrial has no effect on the direction of Nien Hsing i.e., Nien Hsing and Ton Yi go up and down completely randomly.

Pair Corralation between Nien Hsing and Ton Yi

Assuming the 90 days trading horizon Nien Hsing Textile is expected to generate 0.74 times more return on investment than Ton Yi. However, Nien Hsing Textile is 1.36 times less risky than Ton Yi. It trades about -0.03 of its potential returns per unit of risk. Ton Yi Industrial is currently generating about -0.03 per unit of risk. If you would invest  2,305  in Nien Hsing Textile on December 4, 2024 and sell it today you would lose (300.00) from holding Nien Hsing Textile or give up 13.02% of portfolio value over 90 days.

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

Nien Hsing Textile  vs.  Ton Yi Industrial

Nien Hsing Textile

Risk-Adjusted Performance

Very Weak

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

Ton Yi Industrial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ton Yi Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ton Yi 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 Nien Hsing and Ton Yi

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

The idea behind Nien Hsing Textile and Ton Yi Industrial 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.