Correlation Between Hwa Fong and TISCO Financial

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

By analyzing existing cross correlation between Hwa Fong Rubber and TISCO Financial Group, you can compare the effects of market volatilities on Hwa Fong and TISCO Financial 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 Hwa Fong with a short position of TISCO Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwa Fong and TISCO Financial.

Diversification Opportunities for Hwa Fong and TISCO Financial

0.34

Correlation Coefficient

Hwa Fong  TISCO Financial

Weak diversification

The 3 months correlation between Hwa and TISCO is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and TISCO Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TISCO Financial Group and Hwa Fong 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 Hwa Fong Rubber are associated (or correlated) with TISCO Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TISCO Financial Group has no effect on the direction of Hwa Fong i.e., Hwa Fong and TISCO Financial go up and down completely randomly.

Pair Corralation between Hwa Fong and TISCO Financial

Assuming the 90 days trading horizon Hwa Fong Rubber is expected to under-perform the TISCO Financial. In addition to that, Hwa Fong is 2.43 times more volatile than TISCO Financial Group. It trades about -0.15 of its total potential returns per unit of risk. TISCO Financial Group is currently generating about -0.02 per unit of volatility. If you would invest  9,750  in TISCO Financial Group on September 13, 2024 and sell it today you would lose (50.00) from holding TISCO Financial Group or give up 0.51% of portfolio value over 90 days.

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

Hwa Fong Rubber  vs.  TISCO Financial Group

Hwa Fong Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwa Fong Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

TISCO Financial Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hwa Fong and TISCO Financial

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

The idea behind Hwa Fong Rubber and TISCO Financial Group 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.