Correlation Between Chinese Gamer and Top Union

Can any of the company-specific risk be diversified away by investing in both Chinese Gamer and Top Union 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 Chinese Gamer and Top Union into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chinese Gamer International and Top Union Electronics, you can compare the effects of market volatilities on Chinese Gamer and Top Union 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 Chinese Gamer with a short position of Top Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Gamer and Top Union.

Diversification Opportunities for Chinese Gamer and Top Union

0.27

Correlation Coefficient

Chinese Gamer  Top Union

Modest diversification

The 3 months correlation between Chinese and Top is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Gamer International and Top Union Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Union Electronics and Chinese Gamer 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 Chinese Gamer International are associated (or correlated) with Top Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Union Electronics has no effect on the direction of Chinese Gamer i.e., Chinese Gamer and Top Union go up and down completely randomly.

Pair Corralation between Chinese Gamer and Top Union

Assuming the 90 days trading horizon Chinese Gamer International is expected to under-perform the Top Union. But the stock apears to be less risky and, when comparing its historical volatility, Chinese Gamer International is 1.01 times less risky than Top Union. The stock trades about -0.08 of its potential returns per unit of risk. The Top Union Electronics is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,250  in Top Union Electronics on October 25, 2024 and sell it today you would lose (125.00) from holding Top Union Electronics or give up 3.85% of portfolio value over 90 days.

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

Chinese Gamer International  vs.  Top Union Electronics

Chinese Gamer Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Gamer International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chinese Gamer is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Top Union Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Union Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Top Union is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chinese Gamer and Top Union

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

The idea behind Chinese Gamer International and Top Union Electronics 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.