Correlation Between TongFu Microelectronics and RoadMain T

Can any of the company-specific risk be diversified away by investing in both TongFu Microelectronics and RoadMain T 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 TongFu Microelectronics and RoadMain T into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TongFu Microelectronics Co and RoadMain T Co, you can compare the effects of market volatilities on TongFu Microelectronics and RoadMain T 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 TongFu Microelectronics with a short position of RoadMain T. Check out your portfolio center. Please also check ongoing floating volatility patterns of TongFu Microelectronics and RoadMain T.

Diversification Opportunities for TongFu Microelectronics and RoadMain T

0.59

Correlation Coefficient

TongFu Microelectronics  RoadMain T

Very weak diversification

The 3 months correlation between TongFu and RoadMain is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding TongFu Microelectronics Co and RoadMain T Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RoadMain T and TongFu Microelectronics 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 TongFu Microelectronics Co are associated (or correlated) with RoadMain T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RoadMain T has no effect on the direction of TongFu Microelectronics i.e., TongFu Microelectronics and RoadMain T go up and down completely randomly.

Pair Corralation between TongFu Microelectronics and RoadMain T

Assuming the 90 days trading horizon TongFu Microelectronics Co is expected to generate 1.7 times more return on investment than RoadMain T. However, TongFu Microelectronics is 1.7 times more volatile than RoadMain T Co. It trades about 0.14 of its potential returns per unit of risk. RoadMain T Co is currently generating about -0.1 per unit of risk. If you would invest  2,456  in TongFu Microelectronics Co on September 30, 2024 and sell it today you would earn a total of  624.00  from holding TongFu Microelectronics Co or generate 25.41% return on investment over 90 days.

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

TongFu Microelectronics Co  vs.  RoadMain T Co

TongFu Microelectronics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TongFu Microelectronics Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TongFu Microelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

RoadMain T

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RoadMain T Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, RoadMain T is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TongFu Microelectronics and RoadMain T

The main advantage of trading using opposite TongFu Microelectronics and RoadMain T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TongFu Microelectronics position performs unexpectedly, RoadMain T 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 RoadMain T will offset losses from the drop in RoadMain T's long position.

The idea behind TongFu Microelectronics Co and RoadMain T Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.