Correlation Between Tong Hsing and Scientech Corp

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

Diversification Opportunities for Tong Hsing and Scientech Corp

0.31

Correlation Coefficient

Tong Hsing  Scientech Corp

Weak diversification

The 3 months correlation between Tong and Scientech is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hsing Electronic and Scientech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientech Corp 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 Scientech Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientech Corp has no effect on the direction of Tong Hsing i.e., Tong Hsing and Scientech Corp go up and down completely randomly.

Pair Corralation between Tong Hsing and Scientech Corp

Assuming the 90 days trading horizon Tong Hsing Electronic is expected to under-perform the Scientech Corp. But the stock apears to be less risky and, when comparing its historical volatility, Tong Hsing Electronic is 1.64 times less risky than Scientech Corp. The stock trades about -0.04 of its potential returns per unit of risk. The Scientech Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  39,750  in Scientech Corp on September 13, 2024 and sell it today you would earn a total of  2,050  from holding Scientech Corp or generate 5.16% 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.  Scientech Corp

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.

Scientech Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scientech Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Scientech Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tong Hsing and Scientech Corp

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

The idea behind Tong Hsing Electronic and Scientech Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.