Correlation Between Bingo Software and TongFu Microelectronics

Can any of the company-specific risk be diversified away by investing in both Bingo Software and TongFu Microelectronics 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 Bingo Software and TongFu Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bingo Software Co and TongFu Microelectronics Co, you can compare the effects of market volatilities on Bingo Software and TongFu Microelectronics 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 Bingo Software with a short position of TongFu Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bingo Software and TongFu Microelectronics.

Diversification Opportunities for Bingo Software and TongFu Microelectronics

0.45

Correlation Coefficient

Bingo Software  TongFu Microelectronics

Very weak diversification

The 3 months correlation between Bingo and TongFu is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bingo Software Co and TongFu Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TongFu Microelectronics and Bingo Software 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 Bingo Software Co are associated (or correlated) with TongFu Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TongFu Microelectronics has no effect on the direction of Bingo Software i.e., Bingo Software and TongFu Microelectronics go up and down completely randomly.

Pair Corralation between Bingo Software and TongFu Microelectronics

Assuming the 90 days trading horizon Bingo Software Co is expected to generate 1.98 times more return on investment than TongFu Microelectronics. However, Bingo Software is 1.98 times more volatile than TongFu Microelectronics Co. It trades about 0.1 of its potential returns per unit of risk. TongFu Microelectronics Co is currently generating about -0.03 per unit of risk. If you would invest  2,777  in Bingo Software Co on December 23, 2024 and sell it today you would earn a total of  775.00  from holding Bingo Software Co or generate 27.91% return on investment over 90 days.

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

Bingo Software Co  vs.  TongFu Microelectronics Co

Bingo Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bingo Software Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bingo Software sustained solid returns over the last few months and may actually be approaching a breakup point.

TongFu Microelectronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days TongFu Microelectronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TongFu Microelectronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bingo Software and TongFu Microelectronics

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

The idea behind Bingo Software Co and TongFu Microelectronics 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.