Correlation Between Tong Hua and Samart Digital

Can any of the company-specific risk be diversified away by investing in both Tong Hua and Samart Digital 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 Tong Hua and Samart Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tong Hua Holding and Samart Digital Public, you can compare the effects of market volatilities on Tong Hua and Samart Digital 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 Tong Hua with a short position of Samart Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hua and Samart Digital.

Diversification Opportunities for Tong Hua and Samart Digital

-0.37

Correlation Coefficient

Tong Hua  Samart Digital

Very good diversification

The 3 months correlation between Tong and Samart is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hua Holding and Samart Digital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samart Digital Public and Tong Hua 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 Tong Hua Holding are associated (or correlated) with Samart Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samart Digital Public has no effect on the direction of Tong Hua i.e., Tong Hua and Samart Digital go up and down completely randomly.

Pair Corralation between Tong Hua and Samart Digital

Assuming the 90 days horizon Tong Hua Holding is expected to generate 5.51 times more return on investment than Samart Digital. However, Tong Hua is 5.51 times more volatile than Samart Digital Public. It trades about 0.11 of its potential returns per unit of risk. Samart Digital Public is currently generating about 0.17 per unit of risk. If you would invest  99.00  in Tong Hua Holding on August 31, 2024 and sell it today you would lose (27.00) from holding Tong Hua Holding or give up 27.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Tong Hua Holding  vs.  Samart Digital Public

Tong Hua Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tong Hua Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Tong Hua disclosed solid returns over the last few months and may actually be approaching a breakup point.

Samart Digital Public

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samart Digital Public are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Samart Digital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tong Hua and Samart Digital

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

The idea behind Tong Hua Holding and Samart Digital Public 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.