Correlation Between TCL Electronics and Wearable Devices

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

By analyzing existing cross correlation between TCL Electronics Holdings and Wearable Devices, you can compare the effects of market volatilities on TCL Electronics and Wearable Devices 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 TCL Electronics with a short position of Wearable Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of TCL Electronics and Wearable Devices.

Diversification Opportunities for TCL Electronics and Wearable Devices

0.04

Correlation Coefficient

TCL Electronics  Wearable Devices

Significant diversification

The 3 months correlation between TCL and Wearable is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding TCL Electronics Holdings and Wearable Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wearable Devices and TCL Electronics 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 TCL Electronics Holdings are associated (or correlated) with Wearable Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wearable Devices has no effect on the direction of TCL Electronics i.e., TCL Electronics and Wearable Devices go up and down completely randomly.

Pair Corralation between TCL Electronics and Wearable Devices

Assuming the 90 days horizon TCL Electronics is expected to generate 2.51 times less return on investment than Wearable Devices. But when comparing it to its historical volatility, TCL Electronics Holdings is 3.09 times less risky than Wearable Devices. It trades about 0.09 of its potential returns per unit of risk. Wearable Devices is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  149.00  in Wearable Devices on September 18, 2024 and sell it today you would earn a total of  7.00  from holding Wearable Devices or generate 4.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

TCL Electronics Holdings  vs.  Wearable Devices

TCL Electronics Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TCL Electronics Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, TCL Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Wearable Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wearable Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with TCL Electronics and Wearable Devices

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

The idea behind TCL Electronics Holdings and Wearable Devices 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.