Correlation Between FarGlory Hotel and Taitien Electronics

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

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

Diversification Opportunities for FarGlory Hotel and Taitien Electronics

0.82

Correlation Coefficient

FarGlory Hotel  Taitien Electronics

Very poor diversification

The 3 months correlation between FarGlory and Taitien is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding FarGlory Hotel Co and Taitien Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taitien Electronics and FarGlory Hotel 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 FarGlory Hotel Co are associated (or correlated) with Taitien Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taitien Electronics has no effect on the direction of FarGlory Hotel i.e., FarGlory Hotel and Taitien Electronics go up and down completely randomly.

Pair Corralation between FarGlory Hotel and Taitien Electronics

Assuming the 90 days trading horizon FarGlory Hotel Co is expected to under-perform the Taitien Electronics. But the stock apears to be less risky and, when comparing its historical volatility, FarGlory Hotel Co is 1.23 times less risky than Taitien Electronics. The stock trades about -0.06 of its potential returns per unit of risk. The Taitien Electronics Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,640  in Taitien Electronics Co on September 13, 2024 and sell it today you would lose (50.00) from holding Taitien Electronics Co or give up 1.89% of portfolio value over 90 days.

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

FarGlory Hotel Co  vs.  Taitien Electronics Co

FarGlory Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Taitien Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with FarGlory Hotel and Taitien Electronics

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

The idea behind FarGlory Hotel Co and Taitien Electronics 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.