Correlation Between Te Chang and Realtek Semiconductor

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

By analyzing existing cross correlation between Te Chang Construction and Realtek Semiconductor Corp, you can compare the effects of market volatilities on Te Chang and Realtek Semiconductor 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 Te Chang with a short position of Realtek Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Te Chang and Realtek Semiconductor.

Diversification Opportunities for Te Chang and Realtek Semiconductor

0.55

Correlation Coefficient

Te Chang  Realtek Semiconductor

Very weak diversification

The 3 months correlation between 5511 and Realtek is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and Realtek Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realtek Semiconductor and Te Chang 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 Te Chang Construction are associated (or correlated) with Realtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realtek Semiconductor has no effect on the direction of Te Chang i.e., Te Chang and Realtek Semiconductor go up and down completely randomly.

Pair Corralation between Te Chang and Realtek Semiconductor

Assuming the 90 days trading horizon Te Chang Construction is expected to under-perform the Realtek Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Te Chang Construction is 1.22 times less risky than Realtek Semiconductor. The stock trades about -0.02 of its potential returns per unit of risk. The Realtek Semiconductor Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  53,100  in Realtek Semiconductor Corp on September 29, 2024 and sell it today you would earn a total of  2,700  from holding Realtek Semiconductor Corp or generate 5.08% return on investment over 90 days.

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

Te Chang Construction  vs.  Realtek Semiconductor Corp

Te Chang Construction

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Te Chang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Realtek Semiconductor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Realtek Semiconductor Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Realtek Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Te Chang and Realtek Semiconductor

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

The idea behind Te Chang Construction and Realtek Semiconductor 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.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.