Correlation Between Tung Ho and Chun Yuan

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

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

Diversification Opportunities for Tung Ho and Chun Yuan

-0.14

Correlation Coefficient

Tung Ho  Chun Yuan

Good diversification

The 3 months correlation between Tung and Chun is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Steel and Chun Yuan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chun Yuan Steel and Tung 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 Tung Ho Steel are associated (or correlated) with Chun Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chun Yuan Steel has no effect on the direction of Tung Ho i.e., Tung Ho and Chun Yuan go up and down completely randomly.

Pair Corralation between Tung Ho and Chun Yuan

Assuming the 90 days trading horizon Tung Ho Steel is expected to under-perform the Chun Yuan. But the stock apears to be less risky and, when comparing its historical volatility, Tung Ho Steel is 1.22 times less risky than Chun Yuan. The stock trades about 0.0 of its potential returns per unit of risk. The Chun Yuan Steel is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,870  in Chun Yuan Steel on September 14, 2024 and sell it today you would earn a total of  15.00  from holding Chun Yuan Steel or generate 0.8% return on investment over 90 days.

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

Tung Ho Steel  vs.  Chun Yuan Steel

Tung Ho Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tung Ho Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Chun Yuan Steel

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Tung Ho and Chun Yuan

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

The idea behind Tung Ho Steel and Chun Yuan 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.