Correlation Between Tong Hsing and LK Engineering

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

Diversification Opportunities for Tong Hsing and LK Engineering

-0.34

Correlation Coefficient

Tong Hsing  LK Engineering

Very good diversification

The 3 months correlation between Tong and 6139 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hsing Electronic and LK Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LK Engineering 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 LK Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LK Engineering has no effect on the direction of Tong Hsing i.e., Tong Hsing and LK Engineering go up and down completely randomly.

Pair Corralation between Tong Hsing and LK Engineering

Assuming the 90 days trading horizon Tong Hsing Electronic is expected to under-perform the LK Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Tong Hsing Electronic is 1.22 times less risky than LK Engineering. The stock trades about -0.07 of its potential returns per unit of risk. The LK Engineering Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  22,600  in LK Engineering Co on October 24, 2024 and sell it today you would earn a total of  2,400  from holding LK Engineering Co or generate 10.62% 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.  LK Engineering Co

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.

LK Engineering

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LK Engineering Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, LK Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tong Hsing and LK Engineering

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

The idea behind Tong Hsing Electronic and LK Engineering Co 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.