Correlation Between Powerchip Semiconductor and Tah Tong

Can any of the company-specific risk be diversified away by investing in both Powerchip Semiconductor and Tah Tong 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 Powerchip Semiconductor and Tah Tong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Powerchip Semiconductor Manufacturing and Tah Tong Textile, you can compare the effects of market volatilities on Powerchip Semiconductor and Tah Tong 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 Powerchip Semiconductor with a short position of Tah Tong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Powerchip Semiconductor and Tah Tong.

Diversification Opportunities for Powerchip Semiconductor and Tah Tong

0.28

Correlation Coefficient

Powerchip Semiconductor  Tah Tong

Modest diversification

The 3 months correlation between Powerchip and Tah is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Powerchip Semiconductor Manufa and Tah Tong Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tah Tong Textile and Powerchip Semiconductor 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 Powerchip Semiconductor Manufacturing are associated (or correlated) with Tah Tong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tah Tong Textile has no effect on the direction of Powerchip Semiconductor i.e., Powerchip Semiconductor and Tah Tong go up and down completely randomly.

Pair Corralation between Powerchip Semiconductor and Tah Tong

Assuming the 90 days trading horizon Powerchip Semiconductor Manufacturing is expected to generate 2.05 times more return on investment than Tah Tong. However, Powerchip Semiconductor is 2.05 times more volatile than Tah Tong Textile. It trades about 0.07 of its potential returns per unit of risk. Tah Tong Textile is currently generating about -0.04 per unit of risk. If you would invest  1,590  in Powerchip Semiconductor Manufacturing on December 22, 2024 and sell it today you would earn a total of  195.00  from holding Powerchip Semiconductor Manufacturing or generate 12.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.25%
Values	Daily Returns

Powerchip Semiconductor Manufa  vs.  Tah Tong Textile

Powerchip Semiconductor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Powerchip Semiconductor Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Powerchip Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Tah Tong Textile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tah Tong Textile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tah Tong is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Powerchip Semiconductor and Tah Tong

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

The idea behind Powerchip Semiconductor Manufacturing and Tah Tong Textile 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.