Correlation Between Tung Ho and Prince Housing

Can any of the company-specific risk be diversified away by investing in both Tung Ho and Prince Housing 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 Prince Housing 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 Prince Housing Development, you can compare the effects of market volatilities on Tung Ho and Prince Housing 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 Prince Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tung Ho and Prince Housing.

Diversification Opportunities for Tung Ho and Prince Housing

0.26

Correlation Coefficient

Tung Ho  Prince Housing

Modest diversification

The 3 months correlation between Tung and Prince is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Steel and Prince Housing Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prince Housing Devel 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 Prince Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prince Housing Devel has no effect on the direction of Tung Ho i.e., Tung Ho and Prince Housing go up and down completely randomly.

Pair Corralation between Tung Ho and Prince Housing

Assuming the 90 days trading horizon Tung Ho Steel is expected to under-perform the Prince Housing. But the stock apears to be less risky and, when comparing its historical volatility, Tung Ho Steel is 1.04 times less risky than Prince Housing. The stock trades about -0.28 of its potential returns per unit of risk. The Prince Housing Development is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,050  in Prince Housing Development on October 7, 2024 and sell it today you would lose (35.00) from holding Prince Housing Development or give up 3.33% of portfolio value over 90 days.

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

Tung Ho Steel  vs.  Prince Housing Development

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Prince Housing Devel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prince Housing Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Prince Housing 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 Tung Ho and Prince Housing

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

The idea behind Tung Ho Steel and Prince Housing Development 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 Global Correlations module to find global opportunities by holding instruments from different markets.