Correlation Between Top Union and Green World

Can any of the company-specific risk be diversified away by investing in both Top Union and Green World 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 Top Union and Green World into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Top Union Electronics and Green World Fintech, you can compare the effects of market volatilities on Top Union and Green World 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 Top Union with a short position of Green World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Union and Green World.

Diversification Opportunities for Top Union and Green World

0.12

Correlation Coefficient

Top Union  Green World

Average diversification

The 3 months correlation between Top and Green is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Top Union Electronics and Green World Fintech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green World Fintech and Top Union 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 Top Union Electronics are associated (or correlated) with Green World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green World Fintech has no effect on the direction of Top Union i.e., Top Union and Green World go up and down completely randomly.

Pair Corralation between Top Union and Green World

Assuming the 90 days trading horizon Top Union is expected to generate 1.82 times less return on investment than Green World. But when comparing it to its historical volatility, Top Union Electronics is 1.6 times less risky than Green World. It trades about 0.06 of its potential returns per unit of risk. Green World Fintech is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,882  in Green World Fintech on October 4, 2024 and sell it today you would earn a total of  3,228  from holding Green World Fintech or generate 112.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Top Union Electronics  vs.  Green World Fintech

Top Union Electronics

Risk-Adjusted Performance

1 of 100

Weak

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

Green World Fintech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green World Fintech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Green World showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Top Union and Green World

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

The idea behind Top Union Electronics and Green World Fintech 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.