Correlation Between Tai Tung and Taisol Electronics

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

Diversification Opportunities for Tai Tung and Taisol Electronics

0.78

Correlation Coefficient

Tai Tung  Taisol Electronics

Poor diversification

The 3 months correlation between Tai and Taisol is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and Taisol Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taisol Electronics 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 Taisol Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taisol Electronics has no effect on the direction of Tai Tung i.e., Tai Tung and Taisol Electronics go up and down completely randomly.

Pair Corralation between Tai Tung and Taisol Electronics

Assuming the 90 days trading horizon Tai Tung Communication is expected to generate 0.7 times more return on investment than Taisol Electronics. However, Tai Tung Communication is 1.43 times less risky than Taisol Electronics. It trades about 0.01 of its potential returns per unit of risk. Taisol Electronics Co is currently generating about -0.09 per unit of risk. If you would invest  2,430  in Tai Tung Communication on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Tai Tung Communication or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.21%
Values	Daily Returns

Tai Tung Communication  vs.  Taisol Electronics Co

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.

Taisol Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taisol Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Tai Tung and Taisol Electronics

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

The idea behind Tai Tung Communication and Taisol Electronics 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 Transaction History module to view history of all your transactions and understand their impact on performance.