Correlation Between Tongling Nonferrous and Sinotrans

Can any of the company-specific risk be diversified away by investing in both Tongling Nonferrous and Sinotrans 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 Sinotrans 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 Sinotrans Ltd Class, you can compare the effects of market volatilities on Tongling Nonferrous and Sinotrans 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 Sinotrans. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tongling Nonferrous and Sinotrans.

Diversification Opportunities for Tongling Nonferrous and Sinotrans

-0.2

Correlation Coefficient

Tongling Nonferrous  Sinotrans

Good diversification

The 3 months correlation between Tongling and Sinotrans is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tongling Nonferrous Metals and Sinotrans Ltd Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinotrans Class 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 Sinotrans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinotrans Class has no effect on the direction of Tongling Nonferrous i.e., Tongling Nonferrous and Sinotrans go up and down completely randomly.

Pair Corralation between Tongling Nonferrous and Sinotrans

Assuming the 90 days trading horizon Tongling Nonferrous Metals is expected to generate 1.51 times more return on investment than Sinotrans. However, Tongling Nonferrous is 1.51 times more volatile than Sinotrans Ltd Class. It trades about 0.09 of its potential returns per unit of risk. Sinotrans Ltd Class is currently generating about -0.04 per unit of risk. If you would invest  331.00  in Tongling Nonferrous Metals on December 28, 2024 and sell it today you would earn a total of  21.00  from holding Tongling Nonferrous Metals or generate 6.34% return on investment over 90 days.

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

Tongling Nonferrous Metals  vs.  Sinotrans Ltd Class

Tongling Nonferrous

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tongling Nonferrous Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongling Nonferrous may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sinotrans Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinotrans Ltd Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinotrans 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 Sinotrans

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

The idea behind Tongling Nonferrous Metals and Sinotrans Ltd Class 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.