Correlation Between Tong Hsing and Ardentec

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

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

Diversification Opportunities for Tong Hsing and Ardentec

0.72

Correlation Coefficient

Tong Hsing  Ardentec

Poor diversification

The 3 months correlation between Tong and Ardentec is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hsing Electronic and Ardentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardentec and Tong Hsing 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 Hsing Electronic are associated (or correlated) with Ardentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardentec has no effect on the direction of Tong Hsing i.e., Tong Hsing and Ardentec go up and down completely randomly.

Pair Corralation between Tong Hsing and Ardentec

Assuming the 90 days trading horizon Tong Hsing Electronic is expected to generate 0.87 times more return on investment than Ardentec. However, Tong Hsing Electronic is 1.14 times less risky than Ardentec. It trades about -0.03 of its potential returns per unit of risk. Ardentec is currently generating about -0.08 per unit of risk. If you would invest  14,150  in Tong Hsing Electronic on September 23, 2024 and sell it today you would lose (600.00) from holding Tong Hsing Electronic or give up 4.24% of portfolio value over 90 days.

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

Tong Hsing Electronic  vs.  Ardentec

Tong Hsing Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ardentec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardentec 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 Hsing and Ardentec

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

The idea behind Tong Hsing Electronic and Ardentec 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..