Correlation Between TCL Electronics and World Technology

Can any of the company-specific risk be diversified away by investing in both TCL Electronics and World 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 TCL Electronics and World Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TCL Electronics Holdings and World Technology Corp, you can compare the effects of market volatilities on TCL Electronics and World 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 TCL Electronics with a short position of World Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of TCL Electronics and World Technology.

Diversification Opportunities for TCL Electronics and World Technology

-0.27

Correlation Coefficient

TCL Electronics  World Technology

Very good diversification

The 3 months correlation between TCL and World is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding TCL Electronics Holdings and World Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Technology Corp and TCL Electronics 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 TCL Electronics Holdings are associated (or correlated) with World Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Technology Corp has no effect on the direction of TCL Electronics i.e., TCL Electronics and World Technology go up and down completely randomly.

Pair Corralation between TCL Electronics and World Technology

Assuming the 90 days horizon TCL Electronics is expected to generate 4.94 times less return on investment than World Technology. But when comparing it to its historical volatility, TCL Electronics Holdings is 3.36 times less risky than World Technology. It trades about 0.09 of its potential returns per unit of risk. World Technology Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  24.00  in World Technology Corp on September 18, 2024 and sell it today you would earn a total of  6.00  from holding World Technology Corp or generate 25.0% return on investment over 90 days.

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

TCL Electronics Holdings  vs.  World Technology Corp

TCL Electronics Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TCL Electronics Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, TCL Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

World Technology Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in World Technology Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, World Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TCL Electronics and World Technology

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

The idea behind TCL Electronics Holdings and World Technology Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.