Correlation Between Tai Tung and Ardentec

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

Diversification Opportunities for Tai Tung and Ardentec

-0.32

Correlation Coefficient

Tai Tung  Ardentec

Very good diversification

The 3 months correlation between Tai and Ardentec is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and Ardentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardentec 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 Ardentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardentec has no effect on the direction of Tai Tung i.e., Tai Tung and Ardentec go up and down completely randomly.

Pair Corralation between Tai Tung and Ardentec

Assuming the 90 days trading horizon Tai Tung Communication is expected to generate 1.58 times more return on investment than Ardentec. However, Tai Tung is 1.58 times more volatile than Ardentec. It trades about 0.05 of its potential returns per unit of risk. Ardentec is currently generating about 0.04 per unit of risk. If you would invest  1,425  in Tai Tung Communication on October 22, 2024 and sell it today you would earn a total of  815.00  from holding Tai Tung Communication or generate 57.19% return on investment over 90 days.

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

Tai Tung Communication  vs.  Ardentec

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.

Ardentec

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ardentec are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ardentec is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Tai Tung and Ardentec

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

The idea behind Tai Tung Communication and Ardentec 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.