Correlation Between TECO Electric and Feng Hsin

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

By analyzing existing cross correlation between TECO Electric Machinery and Feng Hsin Steel, you can compare the effects of market volatilities on TECO Electric and Feng Hsin 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 TECO Electric with a short position of Feng Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of TECO Electric and Feng Hsin.

Diversification Opportunities for TECO Electric and Feng Hsin

0.13

Correlation Coefficient

TECO Electric  Feng Hsin

Average diversification

The 3 months correlation between TECO and Feng is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding TECO Electric Machinery and Feng Hsin Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feng Hsin Steel and TECO Electric 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 TECO Electric Machinery are associated (or correlated) with Feng Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feng Hsin Steel has no effect on the direction of TECO Electric i.e., TECO Electric and Feng Hsin go up and down completely randomly.

Pair Corralation between TECO Electric and Feng Hsin

Assuming the 90 days trading horizon TECO Electric is expected to generate 2.0 times less return on investment than Feng Hsin. But when comparing it to its historical volatility, TECO Electric Machinery is 1.05 times less risky than Feng Hsin. It trades about 0.05 of its potential returns per unit of risk. Feng Hsin Steel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,120  in Feng Hsin Steel on December 20, 2024 and sell it today you would earn a total of  520.00  from holding Feng Hsin Steel or generate 7.3% return on investment over 90 days.

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

TECO Electric Machinery  vs.  Feng Hsin Steel

TECO Electric Machinery

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TECO Electric Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, TECO Electric is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Feng Hsin Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Feng Hsin Steel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Feng Hsin may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TECO Electric and Feng Hsin

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

The idea behind TECO Electric Machinery and Feng Hsin Steel 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.