Correlation Between Tong Hsing and Nishoku Technology

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

Diversification Opportunities for Tong Hsing and Nishoku Technology

-0.31

Correlation Coefficient

Tong Hsing  Nishoku Technology

Very good diversification

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

Pair Corralation between Tong Hsing and Nishoku Technology

Assuming the 90 days trading horizon Tong Hsing Electronic is expected to under-perform the Nishoku Technology. In addition to that, Tong Hsing is 1.79 times more volatile than Nishoku Technology. It trades about -0.21 of its total potential returns per unit of risk. Nishoku Technology is currently generating about 0.48 per unit of volatility. If you would invest  12,950  in Nishoku Technology on October 26, 2024 and sell it today you would earn a total of  1,550  from holding Nishoku Technology or generate 11.97% return on investment over 90 days.

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

Tong Hsing Electronic  vs.  Nishoku Technology

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.

Nishoku Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nishoku Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nishoku Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tong Hsing and Nishoku Technology

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

The idea behind Tong Hsing Electronic and Nishoku Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.