Correlation Between Ton Yi and Information Technology

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

Diversification Opportunities for Ton Yi and Information Technology

0.26

Correlation Coefficient

Ton Yi  Information Technology

Modest diversification

The 3 months correlation between Ton and Information is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ton Yi Industrial and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology 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 Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Ton Yi i.e., Ton Yi and Information Technology go up and down completely randomly.

Pair Corralation between Ton Yi and Information Technology

Assuming the 90 days trading horizon Ton Yi is expected to generate 3.3 times less return on investment than Information Technology. But when comparing it to its historical volatility, Ton Yi Industrial is 2.84 times less risky than Information Technology. It trades about 0.06 of its potential returns per unit of risk. Information Technology Total is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,590  in Information Technology Total on December 4, 2024 and sell it today you would earn a total of  440.00  from holding Information Technology Total or generate 9.59% return on investment over 90 days.

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

Ton Yi Industrial  vs.  Information Technology Total

Ton Yi Industrial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ton Yi Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ton Yi is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Information Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ton Yi and Information Technology

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

The idea behind Ton Yi Industrial and Information Technology Total 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.