Correlation Between Tong Tai and CTCI Corp

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

By analyzing existing cross correlation between Tong Tai Machine Tool and CTCI Corp, you can compare the effects of market volatilities on Tong Tai and CTCI Corp 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 Tong Tai with a short position of CTCI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Tai and CTCI Corp.

Diversification Opportunities for Tong Tai and CTCI Corp

0.74

Correlation Coefficient

Tong Tai  CTCI Corp

Poor diversification

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

Pair Corralation between Tong Tai and CTCI Corp

Assuming the 90 days trading horizon Tong Tai Machine Tool is expected to generate 2.74 times more return on investment than CTCI Corp. However, Tong Tai is 2.74 times more volatile than CTCI Corp. It trades about 0.07 of its potential returns per unit of risk. CTCI Corp is currently generating about -0.1 per unit of risk. If you would invest  2,355  in Tong Tai Machine Tool on September 15, 2024 and sell it today you would earn a total of  655.00  from holding Tong Tai Machine Tool or generate 27.81% return on investment over 90 days.

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

Tong Tai Machine Tool  vs.  CTCI Corp

Tong Tai Machine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tong Tai Machine Tool 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CTCI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tong Tai and CTCI Corp

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

The idea behind Tong Tai Machine Tool and CTCI Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.