Correlation Between Top Glove and Hoya Corp

Can any of the company-specific risk be diversified away by investing in both Top Glove and Hoya Corp 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 Top Glove and Hoya Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Top Glove and Hoya Corp

-0.45

Correlation Coefficient

Top Glove  Hoya Corp

Very good diversification

The 3 months correlation between Top and Hoya is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Top Glove and Hoya Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoya Corp and Top Glove 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 Top Glove are associated (or correlated) with Hoya Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoya Corp has no effect on the direction of Top Glove i.e., Top Glove and Hoya Corp go up and down completely randomly.

Pair Corralation between Top Glove and Hoya Corp

Assuming the 90 days horizon Top Glove is expected to generate 2.74 times more return on investment than Hoya Corp. However, Top Glove is 2.74 times more volatile than Hoya Corp. It trades about 0.11 of its potential returns per unit of risk. Hoya Corp is currently generating about 0.03 per unit of risk. If you would invest  13.00  in Top Glove on September 27, 2024 and sell it today you would earn a total of  18.00  from holding Top Glove or generate 138.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

Top Glove  vs.  Hoya Corp

Top Glove

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Top Glove are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Top Glove reported solid returns over the last few months and may actually be approaching a breakup point.

Hoya Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoya Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Top Glove and Hoya Corp

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

The idea behind Top Glove and Hoya 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.