Correlation Between Tong Hsing and Roundtop Machinery

Can any of the company-specific risk be diversified away by investing in both Tong Hsing and Roundtop Machinery 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 Tong Hsing and Roundtop Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tong Hsing Electronic and Roundtop Machinery Industries, you can compare the effects of market volatilities on Tong Hsing and Roundtop Machinery 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 Tong Hsing with a short position of Roundtop Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hsing and Roundtop Machinery.

Diversification Opportunities for Tong Hsing and Roundtop Machinery

0.35

Correlation Coefficient

Tong Hsing  Roundtop Machinery

Weak diversification

The 3 months correlation between Tong and Roundtop is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hsing Electronic and Roundtop Machinery Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundtop Machinery and Tong Hsing 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 Tong Hsing Electronic are associated (or correlated) with Roundtop Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundtop Machinery has no effect on the direction of Tong Hsing i.e., Tong Hsing and Roundtop Machinery go up and down completely randomly.

Pair Corralation between Tong Hsing and Roundtop Machinery

Assuming the 90 days trading horizon Tong Hsing Electronic is expected to generate 0.42 times more return on investment than Roundtop Machinery. However, Tong Hsing Electronic is 2.4 times less risky than Roundtop Machinery. It trades about 0.11 of its potential returns per unit of risk. Roundtop Machinery Industries is currently generating about -0.07 per unit of risk. If you would invest  13,200  in Tong Hsing Electronic on October 11, 2024 and sell it today you would earn a total of  400.00  from holding Tong Hsing Electronic or generate 3.03% return on investment over 90 days.

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

Tong Hsing Electronic  vs.  Roundtop Machinery Industries

Tong Hsing Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tong Hsing Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tong Hsing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Roundtop Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roundtop Machinery Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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 Tong Hsing and Roundtop Machinery

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

The idea behind Tong Hsing Electronic and Roundtop Machinery Industries 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.