Correlation Between Amlogic Shanghai and Tongding Interconnection

Can any of the company-specific risk be diversified away by investing in both Amlogic Shanghai and Tongding Interconnection 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 Amlogic Shanghai and Tongding Interconnection into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amlogic Shanghai Co and Tongding Interconnection Information, you can compare the effects of market volatilities on Amlogic Shanghai and Tongding Interconnection 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 Amlogic Shanghai with a short position of Tongding Interconnection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amlogic Shanghai and Tongding Interconnection.

Diversification Opportunities for Amlogic Shanghai and Tongding Interconnection

0.35

Correlation Coefficient

Amlogic Shanghai  Tongding Interconnection

Weak diversification

The 3 months correlation between Amlogic and Tongding is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amlogic Shanghai Co and Tongding Interconnection Infor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongding Interconnection and Amlogic Shanghai 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 Amlogic Shanghai Co are associated (or correlated) with Tongding Interconnection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongding Interconnection has no effect on the direction of Amlogic Shanghai i.e., Amlogic Shanghai and Tongding Interconnection go up and down completely randomly.

Pair Corralation between Amlogic Shanghai and Tongding Interconnection

Assuming the 90 days trading horizon Amlogic Shanghai Co is expected to generate 1.12 times more return on investment than Tongding Interconnection. However, Amlogic Shanghai is 1.12 times more volatile than Tongding Interconnection Information. It trades about 0.01 of its potential returns per unit of risk. Tongding Interconnection Information is currently generating about -0.02 per unit of risk. If you would invest  8,640  in Amlogic Shanghai Co on October 23, 2024 and sell it today you would lose (541.00) from holding Amlogic Shanghai Co or give up 6.26% of portfolio value over 90 days.

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

Amlogic Shanghai Co  vs.  Tongding Interconnection Infor

Amlogic Shanghai

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amlogic Shanghai Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amlogic Shanghai sustained solid returns over the last few months and may actually be approaching a breakup point.

Tongding Interconnection

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tongding Interconnection Information are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongding Interconnection sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amlogic Shanghai and Tongding Interconnection

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

The idea behind Amlogic Shanghai Co and Tongding Interconnection Information 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.