Correlation Between Tai Tung and Tah Tong

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

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

Diversification Opportunities for Tai Tung and Tah Tong

0.72

Correlation Coefficient

Tai Tung  Tah Tong

Poor diversification

The 3 months correlation between Tai and Tah is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication 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 Tai Tung 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 Tai Tung Communication 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 Tai Tung i.e., Tai Tung and Tah Tong go up and down completely randomly.

Pair Corralation between Tai Tung and Tah Tong

Assuming the 90 days trading horizon Tai Tung Communication is expected to under-perform the Tah Tong. In addition to that, Tai Tung is 1.61 times more volatile than Tah Tong Textile. It trades about -0.13 of its total potential returns per unit of risk. Tah Tong Textile is currently generating about -0.16 per unit of volatility. If you would invest  1,560  in Tah Tong Textile on October 24, 2024 and sell it today you would lose (205.00) from holding Tah Tong Textile or give up 13.14% of portfolio value over 90 days.

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

Tai Tung Communication  vs.  Tah Tong Textile

Tai Tung Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tai Tung Communication has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Tah Tong Textile

Risk-Adjusted Performance

0 of 100

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Tai Tung and Tah Tong

The main advantage of trading using opposite Tai Tung and Tah Tong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tai Tung 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 Tai Tung Communication 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.