Correlation Between Ton Yi and Nien Hsing

Can any of the company-specific risk be diversified away by investing in both Ton Yi and Nien Hsing 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 Ton Yi and Nien Hsing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ton Yi Industrial and Nien Hsing Textile, you can compare the effects of market volatilities on Ton Yi and Nien Hsing 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 Ton Yi with a short position of Nien Hsing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ton Yi and Nien Hsing.

Diversification Opportunities for Ton Yi and Nien Hsing

0.48

Correlation Coefficient

Ton Yi  Nien Hsing

Very weak diversification

The 3 months correlation between Ton and Nien is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ton Yi Industrial and Nien Hsing Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nien Hsing Textile and Ton Yi 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 Ton Yi Industrial are associated (or correlated) with Nien Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nien Hsing Textile has no effect on the direction of Ton Yi i.e., Ton Yi and Nien Hsing go up and down completely randomly.

Pair Corralation between Ton Yi and Nien Hsing

Assuming the 90 days trading horizon Ton Yi Industrial is expected to generate 1.0 times more return on investment than Nien Hsing. However, Ton Yi Industrial is 1.0 times less risky than Nien Hsing. It trades about 0.31 of its potential returns per unit of risk. Nien Hsing Textile is currently generating about 0.18 per unit of risk. If you would invest  1,520  in Ton Yi Industrial on December 22, 2024 and sell it today you would earn a total of  285.00  from holding Ton Yi Industrial or generate 18.75% return on investment over 90 days.

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

Ton Yi Industrial  vs.  Nien Hsing Textile

Ton Yi Industrial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ton Yi Industrial are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ton Yi showed solid returns over the last few months and may actually be approaching a breakup point.

Nien Hsing Textile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nien Hsing Textile are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nien Hsing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ton Yi and Nien Hsing

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

The idea behind Ton Yi Industrial and Nien Hsing Textile 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.