Correlation Between Ruentex Development and Te Chang

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

By analyzing existing cross correlation between Ruentex Development Co and Te Chang Construction, you can compare the effects of market volatilities on Ruentex Development and Te Chang 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 Ruentex Development with a short position of Te Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and Te Chang.

Diversification Opportunities for Ruentex Development and Te Chang

-0.56

Correlation Coefficient

Ruentex Development  Te Chang

Excellent diversification

The 3 months correlation between Ruentex and 5511 is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and Te Chang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Te Chang Construction and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with Te Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Te Chang Construction has no effect on the direction of Ruentex Development i.e., Ruentex Development and Te Chang go up and down completely randomly.

Pair Corralation between Ruentex Development and Te Chang

Assuming the 90 days trading horizon Ruentex Development Co is expected to generate 1.24 times more return on investment than Te Chang. However, Ruentex Development is 1.24 times more volatile than Te Chang Construction. It trades about 0.05 of its potential returns per unit of risk. Te Chang Construction is currently generating about -0.01 per unit of risk. If you would invest  3,700  in Ruentex Development Co on September 12, 2024 and sell it today you would earn a total of  880.00  from holding Ruentex Development Co or generate 23.78% return on investment over 90 days.

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

Ruentex Development Co  vs.  Te Chang Construction

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

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

Te Chang Construction

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Te Chang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ruentex Development and Te Chang

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

The idea behind Ruentex Development Co and Te Chang Construction 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.