Correlation Between Tang Eng and DV Biomed

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

Diversification Opportunities for Tang Eng and DV Biomed

0.72

Correlation Coefficient

Tang Eng  DV Biomed

Poor diversification

The 3 months correlation between Tang and 6539 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tang Eng Iron and DV Biomed Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DV Biomed 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 DV Biomed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DV Biomed has no effect on the direction of Tang Eng i.e., Tang Eng and DV Biomed go up and down completely randomly.

Pair Corralation between Tang Eng and DV Biomed

Assuming the 90 days trading horizon Tang Eng Iron is expected to generate 0.42 times more return on investment than DV Biomed. However, Tang Eng Iron is 2.41 times less risky than DV Biomed. It trades about -0.35 of its potential returns per unit of risk. DV Biomed Co is currently generating about -0.2 per unit of risk. If you would invest  3,280  in Tang Eng Iron on October 10, 2024 and sell it today you would lose (275.00) from holding Tang Eng Iron or give up 8.38% of portfolio value over 90 days.

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

Tang Eng Iron  vs.  DV Biomed Co

Tang Eng Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tang Eng Iron 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.

DV Biomed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DV Biomed 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Tang Eng and DV Biomed

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

The idea behind Tang Eng Iron and DV Biomed 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.