Correlation Between Tong Tai and Gemtek Technology

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

By analyzing existing cross correlation between Tong Tai Machine Tool and Gemtek Technology Co, you can compare the effects of market volatilities on Tong Tai and Gemtek Technology 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 Tong Tai with a short position of Gemtek Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Tai and Gemtek Technology.

Diversification Opportunities for Tong Tai and Gemtek Technology

0.86

Correlation Coefficient

Tong Tai  Gemtek Technology

Very poor diversification

The 3 months correlation between Tong and Gemtek is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tong Tai Machine Tool and Gemtek Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemtek Technology and Tong Tai 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 Tong Tai Machine Tool are associated (or correlated) with Gemtek Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemtek Technology has no effect on the direction of Tong Tai i.e., Tong Tai and Gemtek Technology go up and down completely randomly.

Pair Corralation between Tong Tai and Gemtek Technology

Assuming the 90 days trading horizon Tong Tai Machine Tool is expected to under-perform the Gemtek Technology. In addition to that, Tong Tai is 1.75 times more volatile than Gemtek Technology Co. It trades about -0.05 of its total potential returns per unit of risk. Gemtek Technology Co is currently generating about -0.07 per unit of volatility. If you would invest  4,085  in Gemtek Technology Co on September 4, 2024 and sell it today you would lose (375.00) from holding Gemtek Technology Co or give up 9.18% of portfolio value over 90 days.

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

Tong Tai Machine Tool  vs.  Gemtek Technology Co

Tong Tai Machine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tong Tai Machine Tool has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Gemtek Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gemtek Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Tong Tai and Gemtek Technology

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

The idea behind Tong Tai Machine Tool and Gemtek Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.