Correlation Between Wearable Devices and TCL Electronics

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

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

Diversification Opportunities for Wearable Devices and TCL Electronics

-0.38

Correlation Coefficient

Wearable Devices  TCL Electronics

Very good diversification

The 3 months correlation between Wearable and TCL is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Wearable Devices and TCL Electronics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCL Electronics Holdings and Wearable Devices 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 Wearable Devices are associated (or correlated) with TCL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCL Electronics Holdings has no effect on the direction of Wearable Devices i.e., Wearable Devices and TCL Electronics go up and down completely randomly.

Pair Corralation between Wearable Devices and TCL Electronics

Given the investment horizon of 90 days Wearable Devices is expected to under-perform the TCL Electronics. In addition to that, Wearable Devices is 3.08 times more volatile than TCL Electronics Holdings. It trades about -0.09 of its total potential returns per unit of risk. TCL Electronics Holdings is currently generating about -0.08 per unit of volatility. If you would invest  70.00  in TCL Electronics Holdings on September 5, 2024 and sell it today you would lose (7.00) from holding TCL Electronics Holdings or give up 10.0% of portfolio value over 90 days.

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

Wearable Devices  vs.  TCL Electronics Holdings

Wearable Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wearable Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

TCL Electronics Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TCL Electronics Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical indicators, TCL Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wearable Devices and TCL Electronics

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

The idea behind Wearable Devices and TCL Electronics Holdings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.