Correlation Between TOPMATERIAL and Mobile Appliance

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

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

Diversification Opportunities for TOPMATERIAL and Mobile Appliance

0.47

Correlation Coefficient

TOPMATERIAL  Mobile Appliance

Very weak diversification

The 3 months correlation between TOPMATERIAL and Mobile is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Mobile Appliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobile Appliance and TOPMATERIAL 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 TOPMATERIAL LTD are associated (or correlated) with Mobile Appliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobile Appliance has no effect on the direction of TOPMATERIAL i.e., TOPMATERIAL and Mobile Appliance go up and down completely randomly.

Pair Corralation between TOPMATERIAL and Mobile Appliance

Assuming the 90 days trading horizon TOPMATERIAL LTD is expected to under-perform the Mobile Appliance. But the stock apears to be less risky and, when comparing its historical volatility, TOPMATERIAL LTD is 1.2 times less risky than Mobile Appliance. The stock trades about -0.19 of its potential returns per unit of risk. The Mobile Appliance is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  230,500  in Mobile Appliance on September 3, 2024 and sell it today you would lose (18,000) from holding Mobile Appliance or give up 7.81% of portfolio value over 90 days.

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

TOPMATERIAL LTD  vs.  Mobile Appliance

TOPMATERIAL LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOPMATERIAL LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

Mobile Appliance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mobile Appliance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mobile Appliance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TOPMATERIAL and Mobile Appliance

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

The idea behind TOPMATERIAL LTD and Mobile Appliance 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.