Correlation Between Tung Ho and RDC Semiconductor

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

Diversification Opportunities for Tung Ho and RDC Semiconductor

0.08

Correlation Coefficient

Tung Ho  RDC Semiconductor

Significant diversification

The 3 months correlation between Tung and RDC is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Steel and RDC Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RDC Semiconductor 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 RDC Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RDC Semiconductor has no effect on the direction of Tung Ho i.e., Tung Ho and RDC Semiconductor go up and down completely randomly.

Pair Corralation between Tung Ho and RDC Semiconductor

Assuming the 90 days trading horizon Tung Ho Steel is expected to generate 0.53 times more return on investment than RDC Semiconductor. However, Tung Ho Steel is 1.9 times less risky than RDC Semiconductor. It trades about 0.04 of its potential returns per unit of risk. RDC Semiconductor Co is currently generating about -0.12 per unit of risk. If you would invest  6,860  in Tung Ho Steel on December 29, 2024 and sell it today you would earn a total of  180.00  from holding Tung Ho Steel or generate 2.62% return on investment over 90 days.

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

Tung Ho Steel  vs.  RDC Semiconductor Co

Tung Ho Steel

Risk-Adjusted Performance

Modest

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

RDC Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days RDC Semiconductor Co 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Tung Ho and RDC Semiconductor

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

The idea behind Tung Ho Steel and RDC Semiconductor Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.