Correlation Between Tai Tung and Transcend Information

Can any of the company-specific risk be diversified away by investing in both Tai Tung and Transcend Information 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 Transcend Information 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 Transcend Information, you can compare the effects of market volatilities on Tai Tung and Transcend Information 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 Transcend Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tai Tung and Transcend Information.

Diversification Opportunities for Tai Tung and Transcend Information

0.37

Correlation Coefficient

Tai Tung  Transcend Information

Weak diversification

The 3 months correlation between Tai and Transcend is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and Transcend Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcend Information 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 Transcend Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcend Information has no effect on the direction of Tai Tung i.e., Tai Tung and Transcend Information go up and down completely randomly.

Pair Corralation between Tai Tung and Transcend Information

Assuming the 90 days trading horizon Tai Tung Communication is expected to under-perform the Transcend Information. But the stock apears to be less risky and, when comparing its historical volatility, Tai Tung Communication is 1.43 times less risky than Transcend Information. The stock trades about -0.03 of its potential returns per unit of risk. The Transcend Information is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9,030  in Transcend Information on December 22, 2024 and sell it today you would earn a total of  1,220  from holding Transcend Information or generate 13.51% return on investment over 90 days.

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

Tai Tung Communication  vs.  Transcend Information

Tai Tung Communication

Risk-Adjusted Performance

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 fairly stable basic indicators, Tai Tung is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Transcend Information

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transcend Information are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Transcend Information showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tai Tung and Transcend Information

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

The idea behind Tai Tung Communication and Transcend 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 CEOs Directory module to screen CEOs from public companies around the world.