Correlation Between Anyang Iron and TongFu Microelectronics

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Can any of the company-specific risk be diversified away by investing in both Anyang Iron 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 Anyang Iron and TongFu Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Anyang Iron Steel and TongFu Microelectronics Co, you can compare the effects of market volatilities on Anyang Iron 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 Anyang Iron with a short position of TongFu Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anyang Iron and TongFu Microelectronics.

Diversification Opportunities for Anyang Iron and TongFu Microelectronics

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Anyang and TongFu is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Anyang Iron Steel and TongFu Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TongFu Microelectronics and Anyang Iron 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 Anyang Iron Steel 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 Anyang Iron i.e., Anyang Iron and TongFu Microelectronics go up and down completely randomly.

Pair Corralation between Anyang Iron and TongFu Microelectronics

Assuming the 90 days trading horizon Anyang Iron Steel is expected to generate 1.5 times more return on investment than TongFu Microelectronics. However, Anyang Iron is 1.5 times more volatile than TongFu Microelectronics Co. It trades about -0.13 of its potential returns per unit of risk. TongFu Microelectronics Co is currently generating about -0.22 per unit of risk. If you would invest  208.00  in Anyang Iron Steel on October 7, 2024 and sell it today you would lose (29.00) from holding Anyang Iron Steel or give up 13.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Anyang Iron Steel  vs.  TongFu Microelectronics Co

 Performance 
       Timeline  
Anyang Iron Steel 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Anyang Iron Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anyang Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
TongFu Microelectronics 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in TongFu Microelectronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TongFu Microelectronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Anyang Iron and TongFu Microelectronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Anyang Iron and TongFu Microelectronics

The main advantage of trading using opposite Anyang Iron and TongFu Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anyang Iron 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 Anyang Iron Steel 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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