Correlation Between Te Chang and Advanced Ceramic

Can any of the company-specific risk be diversified away by investing in both Te Chang and Advanced Ceramic 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 Advanced Ceramic 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 Advanced Ceramic X, you can compare the effects of market volatilities on Te Chang and Advanced Ceramic 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 Advanced Ceramic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Te Chang and Advanced Ceramic.

Diversification Opportunities for Te Chang and Advanced Ceramic

-0.27

Correlation Coefficient

Te Chang  Advanced Ceramic

Very good diversification

The 3 months correlation between 5511 and Advanced is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X 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 Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of Te Chang i.e., Te Chang and Advanced Ceramic go up and down completely randomly.

Pair Corralation between Te Chang and Advanced Ceramic

Assuming the 90 days trading horizon Te Chang Construction is expected to generate 0.72 times more return on investment than Advanced Ceramic. However, Te Chang Construction is 1.39 times less risky than Advanced Ceramic. It trades about -0.02 of its potential returns per unit of risk. Advanced Ceramic X is currently generating about -0.05 per unit of risk. If you would invest  6,780  in Te Chang Construction on September 20, 2024 and sell it today you would lose (520.00) from holding Te Chang Construction or give up 7.67% of portfolio value over 90 days.

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

Te Chang Construction  vs.  Advanced Ceramic X

Te Chang Construction

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 14 (%) 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.

Advanced Ceramic X

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Ceramic X are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Ceramic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Te Chang and Advanced Ceramic

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

The idea behind Te Chang Construction and Advanced Ceramic X 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..