Correlation Between Te Chang and Roo Hsing

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

Diversification Opportunities for Te Chang and Roo Hsing

0.2

Correlation Coefficient

Te Chang  Roo Hsing

Modest diversification

The 3 months correlation between 5511 and Roo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and Roo Hsing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roo Hsing 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 Roo Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roo Hsing has no effect on the direction of Te Chang i.e., Te Chang and Roo Hsing go up and down completely randomly.

Pair Corralation between Te Chang and Roo Hsing

Assuming the 90 days trading horizon Te Chang Construction is expected to generate 0.78 times more return on investment than Roo Hsing. However, Te Chang Construction is 1.29 times less risky than Roo Hsing. It trades about -0.01 of its potential returns per unit of risk. Roo Hsing Co is currently generating about -0.02 per unit of risk. If you would invest  6,714  in Te Chang Construction on October 9, 2024 and sell it today you would lose (394.00) from holding Te Chang Construction or give up 5.87% of portfolio value over 90 days.

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

Te Chang Construction  vs.  Roo Hsing Co

Te Chang Construction

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 16 (%) 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 February 2025.

Roo Hsing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roo Hsing Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Roo Hsing 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 Te Chang and Roo Hsing

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

The idea behind Te Chang Construction and Roo Hsing Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.