Correlation Between Te Chang and Topco Scientific

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

Diversification Opportunities for Te Chang and Topco Scientific

-0.25

Correlation Coefficient

Te Chang  Topco Scientific

Very good diversification

The 3 months correlation between 5511 and Topco is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and Topco Scientific Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topco Scientific 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 Topco Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topco Scientific has no effect on the direction of Te Chang i.e., Te Chang and Topco Scientific go up and down completely randomly.

Pair Corralation between Te Chang and Topco Scientific

Assuming the 90 days trading horizon Te Chang Construction is expected to generate 1.22 times more return on investment than Topco Scientific. However, Te Chang is 1.22 times more volatile than Topco Scientific Co. It trades about 0.1 of its potential returns per unit of risk. Topco Scientific Co is currently generating about 0.08 per unit of risk. If you would invest  2,781  in Te Chang Construction on October 26, 2024 and sell it today you would earn a total of  3,429  from holding Te Chang Construction or generate 123.3% return on investment over 90 days.

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

Te Chang Construction  vs.  Topco Scientific Co

Te Chang Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Te Chang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Topco Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topco Scientific Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Topco Scientific

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

The idea behind Te Chang Construction and Topco Scientific 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.