Correlation Between Tung Ho and Advanced Wireless

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

Diversification Opportunities for Tung Ho and Advanced Wireless

-0.45

Correlation Coefficient

Tung Ho  Advanced Wireless

Very good diversification

The 3 months correlation between Tung and Advanced is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Tung Ho Steel and Advanced Wireless Semiconducto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Wireless 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 Advanced Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Wireless has no effect on the direction of Tung Ho i.e., Tung Ho and Advanced Wireless go up and down completely randomly.

Pair Corralation between Tung Ho and Advanced Wireless

Assuming the 90 days trading horizon Tung Ho Steel is expected to generate 0.57 times more return on investment than Advanced Wireless. However, Tung Ho Steel is 1.74 times less risky than Advanced Wireless. It trades about 0.08 of its potential returns per unit of risk. Advanced Wireless Semiconductor is currently generating about -0.12 per unit of risk. If you would invest  6,860  in Tung Ho Steel on December 28, 2024 and sell it today you would earn a total of  380.00  from holding Tung Ho Steel or generate 5.54% return on investment over 90 days.

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

Tung Ho Steel  vs.  Advanced Wireless Semiconducto

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 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tung Ho may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Advanced Wireless

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Wireless Semiconductor 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 Advanced Wireless

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

The idea behind Tung Ho Steel and Advanced Wireless Semiconductor 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.