Correlation Between TOPMATERIAL and Eugene Technology

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

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

Diversification Opportunities for TOPMATERIAL and Eugene Technology

0.7

Correlation Coefficient

TOPMATERIAL  Eugene Technology

Poor diversification

The 3 months correlation between TOPMATERIAL and Eugene is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Eugene Technology CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eugene Technology CoLtd and TOPMATERIAL 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 TOPMATERIAL LTD are associated (or correlated) with Eugene Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eugene Technology CoLtd has no effect on the direction of TOPMATERIAL i.e., TOPMATERIAL and Eugene Technology go up and down completely randomly.

Pair Corralation between TOPMATERIAL and Eugene Technology

Assuming the 90 days trading horizon TOPMATERIAL is expected to generate 1.24 times less return on investment than Eugene Technology. In addition to that, TOPMATERIAL is 1.7 times more volatile than Eugene Technology CoLtd. It trades about 0.08 of its total potential returns per unit of risk. Eugene Technology CoLtd is currently generating about 0.16 per unit of volatility. If you would invest  3,110,000  in Eugene Technology CoLtd on December 27, 2024 and sell it today you would earn a total of  960,000  from holding Eugene Technology CoLtd or generate 30.87% return on investment over 90 days.

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

TOPMATERIAL LTD  vs.  Eugene Technology CoLtd

TOPMATERIAL LTD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TOPMATERIAL LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TOPMATERIAL sustained solid returns over the last few months and may actually be approaching a breakup point.

Eugene Technology CoLtd

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eugene Technology CoLtd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eugene Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TOPMATERIAL and Eugene Technology

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

The idea behind TOPMATERIAL LTD and Eugene Technology CoLtd 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..