Correlation Between San Fang and Tah Hsin

Can any of the company-specific risk be diversified away by investing in both San Fang and Tah Hsin 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 San Fang and Tah Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between San Fang Chemical and Tah Hsin Industrial, you can compare the effects of market volatilities on San Fang and Tah Hsin 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 San Fang with a short position of Tah Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Fang and Tah Hsin.

Diversification Opportunities for San Fang and Tah Hsin

0.07

Correlation Coefficient

San Fang  Tah Hsin

Significant diversification

The 3 months correlation between San and Tah is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding San Fang Chemical and Tah Hsin Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tah Hsin Industrial and San Fang 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 San Fang Chemical are associated (or correlated) with Tah Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tah Hsin Industrial has no effect on the direction of San Fang i.e., San Fang and Tah Hsin go up and down completely randomly.

Pair Corralation between San Fang and Tah Hsin

Assuming the 90 days trading horizon San Fang Chemical is expected to generate 9.09 times more return on investment than Tah Hsin. However, San Fang is 9.09 times more volatile than Tah Hsin Industrial. It trades about 0.1 of its potential returns per unit of risk. Tah Hsin Industrial is currently generating about -0.03 per unit of risk. If you would invest  3,350  in San Fang Chemical on September 3, 2024 and sell it today you would earn a total of  670.00  from holding San Fang Chemical or generate 20.0% return on investment over 90 days.

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

San Fang Chemical  vs.  Tah Hsin Industrial

San Fang Chemical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in San Fang Chemical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, San Fang showed solid returns over the last few months and may actually be approaching a breakup point.

Tah Hsin Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tah Hsin Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tah Hsin is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with San Fang and Tah Hsin

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

The idea behind San Fang Chemical and Tah Hsin Industrial 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 Stocks Directory module to find actively traded stocks across global markets.