Correlation Between Hu Lane and Tung Thih

Can any of the company-specific risk be diversified away by investing in both Hu Lane and Tung Thih 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 Hu Lane and Tung Thih into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hu Lane Associate and Tung Thih Electronic, you can compare the effects of market volatilities on Hu Lane and Tung Thih 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 Hu Lane with a short position of Tung Thih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hu Lane and Tung Thih.

Diversification Opportunities for Hu Lane and Tung Thih

-0.29

Correlation Coefficient

Hu Lane  Tung Thih

Very good diversification

The 3 months correlation between 6279 and Tung is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hu Lane Associate and Tung Thih Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Thih Electronic and Hu Lane 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 Hu Lane Associate are associated (or correlated) with Tung Thih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Thih Electronic has no effect on the direction of Hu Lane i.e., Hu Lane and Tung Thih go up and down completely randomly.

Pair Corralation between Hu Lane and Tung Thih

Assuming the 90 days trading horizon Hu Lane is expected to generate 5.3 times less return on investment than Tung Thih. But when comparing it to its historical volatility, Hu Lane Associate is 1.61 times less risky than Tung Thih. It trades about 0.03 of its potential returns per unit of risk. Tung Thih Electronic is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,360  in Tung Thih Electronic on September 14, 2024 and sell it today you would earn a total of  1,540  from holding Tung Thih Electronic or generate 18.42% return on investment over 90 days.

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

Hu Lane Associate  vs.  Tung Thih Electronic

Hu Lane Associate

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hu Lane Associate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hu Lane is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tung Thih Electronic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tung Thih Electronic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tung Thih showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hu Lane and Tung Thih

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

The idea behind Hu Lane Associate and Tung Thih Electronic 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.