Correlation Between Chinese Universe and TongFu Microelectronics

Can any of the company-specific risk be diversified away by investing in both Chinese Universe and TongFu Microelectronics 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 Chinese Universe and TongFu Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chinese Universe Publishing and TongFu Microelectronics Co, you can compare the effects of market volatilities on Chinese Universe and TongFu Microelectronics 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 Chinese Universe with a short position of TongFu Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Universe and TongFu Microelectronics.

Diversification Opportunities for Chinese Universe and TongFu Microelectronics

-0.77

Correlation Coefficient

Chinese Universe  TongFu Microelectronics

Pay attention - limited upside

The 3 months correlation between Chinese and TongFu is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Universe Publishing and TongFu Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TongFu Microelectronics and Chinese Universe 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 Chinese Universe Publishing are associated (or correlated) with TongFu Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TongFu Microelectronics has no effect on the direction of Chinese Universe i.e., Chinese Universe and TongFu Microelectronics go up and down completely randomly.

Pair Corralation between Chinese Universe and TongFu Microelectronics

Assuming the 90 days trading horizon Chinese Universe Publishing is expected to generate 0.83 times more return on investment than TongFu Microelectronics. However, Chinese Universe Publishing is 1.21 times less risky than TongFu Microelectronics. It trades about -0.01 of its potential returns per unit of risk. TongFu Microelectronics Co is currently generating about -0.1 per unit of risk. If you would invest  1,267  in Chinese Universe Publishing on October 2, 2024 and sell it today you would lose (12.00) from holding Chinese Universe Publishing or give up 0.95% of portfolio value over 90 days.

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

Chinese Universe Publishing  vs.  TongFu Microelectronics Co

Chinese Universe Pub

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Universe Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

TongFu Microelectronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TongFu Microelectronics Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TongFu Microelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chinese Universe and TongFu Microelectronics

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

The idea behind Chinese Universe Publishing and TongFu Microelectronics 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.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.