Correlation Between Tongling Nonferrous and Kangyue Technology

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

By analyzing existing cross correlation between Tongling Nonferrous Metals and Kangyue Technology Co, you can compare the effects of market volatilities on Tongling Nonferrous and Kangyue Technology 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 Tongling Nonferrous with a short position of Kangyue Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tongling Nonferrous and Kangyue Technology.

Diversification Opportunities for Tongling Nonferrous and Kangyue Technology

0.08

Correlation Coefficient

Tongling Nonferrous  Kangyue Technology

Significant diversification

The 3 months correlation between Tongling and Kangyue is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tongling Nonferrous Metals and Kangyue Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kangyue Technology and Tongling Nonferrous 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 Tongling Nonferrous Metals are associated (or correlated) with Kangyue Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kangyue Technology has no effect on the direction of Tongling Nonferrous i.e., Tongling Nonferrous and Kangyue Technology go up and down completely randomly.

Pair Corralation between Tongling Nonferrous and Kangyue Technology

Assuming the 90 days trading horizon Tongling Nonferrous Metals is expected to generate 0.39 times more return on investment than Kangyue Technology. However, Tongling Nonferrous Metals is 2.56 times less risky than Kangyue Technology. It trades about 0.01 of its potential returns per unit of risk. Kangyue Technology Co is currently generating about 0.0 per unit of risk. If you would invest  321.00  in Tongling Nonferrous Metals on October 4, 2024 and sell it today you would earn a total of  2.00  from holding Tongling Nonferrous Metals or generate 0.62% return on investment over 90 days.

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

Tongling Nonferrous Metals  vs.  Kangyue Technology Co

Tongling Nonferrous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tongling Nonferrous Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kangyue Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tongling Nonferrous and Kangyue Technology

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

The idea behind Tongling Nonferrous Metals and Kangyue Technology Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.