Correlation Between Te Chang and Xander International

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

Diversification Opportunities for Te Chang and Xander International

0.07

Correlation Coefficient

Te Chang  Xander International

Significant diversification

The 3 months correlation between 5511 and Xander is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and Xander International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xander International 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 Xander International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xander International has no effect on the direction of Te Chang i.e., Te Chang and Xander International go up and down completely randomly.

Pair Corralation between Te Chang and Xander International

Assuming the 90 days trading horizon Te Chang Construction is expected to under-perform the Xander International. But the stock apears to be less risky and, when comparing its historical volatility, Te Chang Construction is 1.62 times less risky than Xander International. The stock trades about -0.02 of its potential returns per unit of risk. The Xander International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,405  in Xander International on September 20, 2024 and sell it today you would earn a total of  5.00  from holding Xander International or generate 0.21% return on investment over 90 days.

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

Te Chang Construction  vs.  Xander International

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.

Xander International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xander International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Xander International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Te Chang and Xander International

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

The idea behind Te Chang Construction and Xander International 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.