Correlation Between Sun Max and Tang Eng

Can any of the company-specific risk be diversified away by investing in both Sun Max and Tang Eng 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 Sun Max and Tang Eng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sun Max Tech and Tang Eng Iron, you can compare the effects of market volatilities on Sun Max and Tang Eng 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 Sun Max with a short position of Tang Eng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Max and Tang Eng.

Diversification Opportunities for Sun Max and Tang Eng

0.13

Correlation Coefficient

Sun Max  Tang Eng

Average diversification

The 3 months correlation between Sun and Tang is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sun Max Tech and Tang Eng Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tang Eng Iron and Sun Max 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 Sun Max Tech are associated (or correlated) with Tang Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tang Eng Iron has no effect on the direction of Sun Max i.e., Sun Max and Tang Eng go up and down completely randomly.

Pair Corralation between Sun Max and Tang Eng

Assuming the 90 days trading horizon Sun Max Tech is expected to under-perform the Tang Eng. In addition to that, Sun Max is 2.7 times more volatile than Tang Eng Iron. It trades about -0.03 of its total potential returns per unit of risk. Tang Eng Iron is currently generating about -0.03 per unit of volatility. If you would invest  3,285  in Tang Eng Iron on September 26, 2024 and sell it today you would lose (135.00) from holding Tang Eng Iron or give up 4.11% of portfolio value over 90 days.

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

Sun Max Tech  vs.  Tang Eng Iron

Sun Max Tech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Max Tech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sun Max may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tang Eng Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tang Eng Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tang Eng 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 Sun Max and Tang Eng

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

The idea behind Sun Max Tech and Tang Eng Iron 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.