Correlation Between Te Chang and X Legend

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

Diversification Opportunities for Te Chang and X Legend

-0.66

Correlation Coefficient

Te Chang  X Legend

Excellent diversification

The 3 months correlation between 5511 and 4994 is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and X Legend Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Legend Entertainment 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 X Legend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Legend Entertainment has no effect on the direction of Te Chang i.e., Te Chang and X Legend go up and down completely randomly.

Pair Corralation between Te Chang and X Legend

Assuming the 90 days trading horizon Te Chang Construction is expected to under-perform the X Legend. In addition to that, Te Chang is 1.04 times more volatile than X Legend Entertainment Co. It trades about -0.02 of its total potential returns per unit of risk. X Legend Entertainment Co is currently generating about -0.01 per unit of volatility. If you would invest  10,750  in X Legend Entertainment Co on October 4, 2024 and sell it today you would lose (450.00) from holding X Legend Entertainment Co or give up 4.19% of portfolio value over 90 days.

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

Te Chang Construction  vs.  X Legend Entertainment Co

Te Chang Construction

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 15 (%) 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.

X Legend Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X Legend Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Te Chang and X Legend

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

The idea behind Te Chang Construction and X Legend Entertainment 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.