Correlation Between Tong Hsing and Chroma ATE

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

Diversification Opportunities for Tong Hsing and Chroma ATE

0.01

Correlation Coefficient

Tong Hsing  Chroma ATE

Significant diversification

The 3 months correlation between Tong and Chroma is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hsing Electronic and Chroma ATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chroma ATE 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 Chroma ATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chroma ATE has no effect on the direction of Tong Hsing i.e., Tong Hsing and Chroma ATE go up and down completely randomly.

Pair Corralation between Tong Hsing and Chroma ATE

Assuming the 90 days trading horizon Tong Hsing Electronic is expected to under-perform the Chroma ATE. But the stock apears to be less risky and, when comparing its historical volatility, Tong Hsing Electronic is 1.85 times less risky than Chroma ATE. The stock trades about -0.21 of its potential returns per unit of risk. The Chroma ATE is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  40,900  in Chroma ATE on October 26, 2024 and sell it today you would lose (2,950) from holding Chroma ATE or give up 7.21% of portfolio value over 90 days.

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

Tong Hsing Electronic  vs.  Chroma ATE

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 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.

Chroma ATE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tong Hsing and Chroma ATE

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

The idea behind Tong Hsing Electronic and Chroma ATE 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.