Correlation Between Jiaozuo Wanfang and Tianshui Huatian

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

By analyzing existing cross correlation between Jiaozuo Wanfang Aluminum and Tianshui Huatian Technology, you can compare the effects of market volatilities on Jiaozuo Wanfang and Tianshui Huatian 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 Jiaozuo Wanfang with a short position of Tianshui Huatian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jiaozuo Wanfang and Tianshui Huatian.

Diversification Opportunities for Jiaozuo Wanfang and Tianshui Huatian

0.58

Correlation Coefficient

Jiaozuo Wanfang  Tianshui Huatian

Very weak diversification

The 3 months correlation between Jiaozuo and Tianshui is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Jiaozuo Wanfang Aluminum and Tianshui Huatian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshui Huatian Tec and Jiaozuo Wanfang 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 Jiaozuo Wanfang Aluminum are associated (or correlated) with Tianshui Huatian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshui Huatian Tec has no effect on the direction of Jiaozuo Wanfang i.e., Jiaozuo Wanfang and Tianshui Huatian go up and down completely randomly.

Pair Corralation between Jiaozuo Wanfang and Tianshui Huatian

Assuming the 90 days trading horizon Jiaozuo Wanfang is expected to generate 1.41 times less return on investment than Tianshui Huatian. In addition to that, Jiaozuo Wanfang is 1.1 times more volatile than Tianshui Huatian Technology. It trades about 0.08 of its total potential returns per unit of risk. Tianshui Huatian Technology is currently generating about 0.13 per unit of volatility. If you would invest  583.00  in Tianshui Huatian Technology on October 2, 2024 and sell it today you would earn a total of  652.00  from holding Tianshui Huatian Technology or generate 111.84% return on investment over 90 days.

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

Jiaozuo Wanfang Aluminum  vs.  Tianshui Huatian Technology

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiaozuo Wanfang Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Tianshui Huatian Tec

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshui Huatian Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianshui Huatian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jiaozuo Wanfang and Tianshui Huatian

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

The idea behind Jiaozuo Wanfang Aluminum and Tianshui Huatian 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.