Correlation Between Holy Stone and Tai Tung

Can any of the company-specific risk be diversified away by investing in both Holy Stone and Tai Tung 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 Holy Stone and Tai Tung into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holy Stone Enterprise and Tai Tung Communication, you can compare the effects of market volatilities on Holy Stone and Tai Tung 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 Holy Stone with a short position of Tai Tung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holy Stone and Tai Tung.

Diversification Opportunities for Holy Stone and Tai Tung

0.78

Correlation Coefficient

Holy Stone  Tai Tung

Poor diversification

The 3 months correlation between Holy and Tai is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and Tai Tung Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tai Tung Communication and Holy Stone 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 Holy Stone Enterprise are associated (or correlated) with Tai Tung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tai Tung Communication has no effect on the direction of Holy Stone i.e., Holy Stone and Tai Tung go up and down completely randomly.

Pair Corralation between Holy Stone and Tai Tung

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to under-perform the Tai Tung. But the stock apears to be less risky and, when comparing its historical volatility, Holy Stone Enterprise is 2.81 times less risky than Tai Tung. The stock trades about -0.07 of its potential returns per unit of risk. The Tai Tung Communication is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,210  in Tai Tung Communication on October 9, 2024 and sell it today you would earn a total of  155.00  from holding Tai Tung Communication or generate 7.01% return on investment over 90 days.

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

Holy Stone Enterprise  vs.  Tai Tung Communication

Holy Stone Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holy Stone Enterprise 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.

Tai Tung Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tai Tung Communication 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.

Pair Trading with Holy Stone and Tai Tung

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

The idea behind Holy Stone Enterprise and Tai Tung Communication 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.