Correlation Between Tang Eng and Penpower Technology

Can any of the company-specific risk be diversified away by investing in both Tang Eng and Penpower Technology 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 Tang Eng and Penpower Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tang Eng Iron and Penpower Technology, you can compare the effects of market volatilities on Tang Eng and Penpower Technology 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 Tang Eng with a short position of Penpower Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tang Eng and Penpower Technology.

Diversification Opportunities for Tang Eng and Penpower Technology

0.74

Correlation Coefficient

Tang Eng  Penpower Technology

Poor diversification

The 3 months correlation between Tang and Penpower is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Tang Eng Iron and Penpower Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penpower Technology and Tang Eng 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 Tang Eng Iron are associated (or correlated) with Penpower Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penpower Technology has no effect on the direction of Tang Eng i.e., Tang Eng and Penpower Technology go up and down completely randomly.

Pair Corralation between Tang Eng and Penpower Technology

Assuming the 90 days trading horizon Tang Eng is expected to generate 4.77 times less return on investment than Penpower Technology. But when comparing it to its historical volatility, Tang Eng Iron is 1.66 times less risky than Penpower Technology. It trades about 0.02 of its potential returns per unit of risk. Penpower Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,600  in Penpower Technology on December 23, 2024 and sell it today you would earn a total of  155.00  from holding Penpower Technology or generate 5.96% return on investment over 90 days.

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

Tang Eng Iron  vs.  Penpower Technology

Tang Eng Iron

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tang Eng Iron are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Tang Eng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Penpower Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penpower Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Penpower Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tang Eng and Penpower Technology

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

The idea behind Tang Eng Iron and Penpower Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.