Correlation Between TECO Electric and Hannstar Display

Can any of the company-specific risk be diversified away by investing in both TECO Electric and Hannstar Display 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 Hannstar Display 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 Hannstar Display Corp, you can compare the effects of market volatilities on TECO Electric and Hannstar Display 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 Hannstar Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of TECO Electric and Hannstar Display.

Diversification Opportunities for TECO Electric and Hannstar Display

0.07

Correlation Coefficient

TECO Electric  Hannstar Display

Significant diversification

The 3 months correlation between TECO and Hannstar is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding TECO Electric Machinery and Hannstar Display Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannstar Display Corp 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 Hannstar Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannstar Display Corp has no effect on the direction of TECO Electric i.e., TECO Electric and Hannstar Display go up and down completely randomly.

Pair Corralation between TECO Electric and Hannstar Display

Assuming the 90 days trading horizon TECO Electric Machinery is expected to under-perform the Hannstar Display. But the stock apears to be less risky and, when comparing its historical volatility, TECO Electric Machinery is 1.33 times less risky than Hannstar Display. The stock trades about -0.02 of its potential returns per unit of risk. The Hannstar Display Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  808.00  in Hannstar Display Corp on December 23, 2024 and sell it today you would earn a total of  34.00  from holding Hannstar Display Corp or generate 4.21% 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.  Hannstar Display Corp

TECO Electric Machinery

Risk-Adjusted Performance

Very Weak

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

Hannstar Display Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hannstar Display Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hannstar Display 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 TECO Electric and Hannstar Display

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

The idea behind TECO Electric Machinery and Hannstar Display Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.