Correlation Between Tai Tung and Tacheng Real

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

Diversification Opportunities for Tai Tung and Tacheng Real

-0.15

Correlation Coefficient

Tai Tung  Tacheng Real

Good diversification

The 3 months correlation between Tai and Tacheng is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and Tacheng Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tacheng Real Estate 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 Tacheng Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tacheng Real Estate has no effect on the direction of Tai Tung i.e., Tai Tung and Tacheng Real go up and down completely randomly.

Pair Corralation between Tai Tung and Tacheng Real

Assuming the 90 days trading horizon Tai Tung is expected to generate 2.97 times less return on investment than Tacheng Real. In addition to that, Tai Tung is 1.17 times more volatile than Tacheng Real Estate. It trades about 0.02 of its total potential returns per unit of risk. Tacheng Real Estate is currently generating about 0.08 per unit of volatility. If you would invest  2,515  in Tacheng Real Estate on September 19, 2024 and sell it today you would earn a total of  1,570  from holding Tacheng Real Estate or generate 62.43% 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.  Tacheng Real Estate

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

Tacheng Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tacheng Real Estate 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 Tacheng Real

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

The idea behind Tai Tung Communication and Tacheng Real Estate 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.