Correlation Between Tai Tung and San Fu

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

Diversification Opportunities for Tai Tung and San Fu

-0.24

Correlation Coefficient

Tai Tung  San Fu

Very good diversification

The 3 months correlation between Tai and San is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and San Fu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Fu Chemical 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 San Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Fu Chemical has no effect on the direction of Tai Tung i.e., Tai Tung and San Fu go up and down completely randomly.

Pair Corralation between Tai Tung and San Fu

Assuming the 90 days trading horizon Tai Tung Communication is expected to under-perform the San Fu. But the stock apears to be less risky and, when comparing its historical volatility, Tai Tung Communication is 1.49 times less risky than San Fu. The stock trades about -0.17 of its potential returns per unit of risk. The San Fu Chemical is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  12,750  in San Fu Chemical on October 15, 2024 and sell it today you would lose (550.00) from holding San Fu Chemical or give up 4.31% of portfolio value over 90 days.

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

Tai Tung Communication  vs.  San Fu Chemical

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.

San Fu Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Fu Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, San Fu 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 San Fu

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

The idea behind Tai Tung Communication and San Fu Chemical 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.