Correlation Between Tong Tai and Gloria Material

Can any of the company-specific risk be diversified away by investing in both Tong Tai and Gloria Material 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 Gloria Material 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 Gloria Material Technology, you can compare the effects of market volatilities on Tong Tai and Gloria Material 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 Gloria Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Tai and Gloria Material.

Diversification Opportunities for Tong Tai and Gloria Material

-0.18

Correlation Coefficient

Tong Tai  Gloria Material

Good diversification

The 3 months correlation between Tong and Gloria is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tong Tai Machine Tool and Gloria Material Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gloria Material Tech 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 Gloria Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gloria Material Tech has no effect on the direction of Tong Tai i.e., Tong Tai and Gloria Material go up and down completely randomly.

Pair Corralation between Tong Tai and Gloria Material

Assuming the 90 days trading horizon Tong Tai Machine Tool is expected to under-perform the Gloria Material. In addition to that, Tong Tai is 2.5 times more volatile than Gloria Material Technology. It trades about -0.05 of its total potential returns per unit of risk. Gloria Material Technology is currently generating about -0.02 per unit of volatility. If you would invest  4,820  in Gloria Material Technology on September 1, 2024 and sell it today you would lose (95.00) from holding Gloria Material Technology or give up 1.97% of portfolio value over 90 days.

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

Tong Tai Machine Tool  vs.  Gloria Material Technology

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.

Gloria Material Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gloria Material Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Gloria Material 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 Tong Tai and Gloria Material

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

The idea behind Tong Tai Machine Tool and Gloria Material Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.