Correlation Between China Nonferrous and Tibet Huayu

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

By analyzing existing cross correlation between China Nonferrous Metal and Tibet Huayu Mining, you can compare the effects of market volatilities on China Nonferrous and Tibet Huayu 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 China Nonferrous with a short position of Tibet Huayu. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Nonferrous and Tibet Huayu.

Diversification Opportunities for China Nonferrous and Tibet Huayu

0.9

Correlation Coefficient

China Nonferrous  Tibet Huayu

Almost no diversification

The 3 months correlation between China and Tibet is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding China Nonferrous Metal and Tibet Huayu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tibet Huayu Mining and China 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 China Nonferrous Metal are associated (or correlated) with Tibet Huayu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tibet Huayu Mining has no effect on the direction of China Nonferrous i.e., China Nonferrous and Tibet Huayu go up and down completely randomly.

Pair Corralation between China Nonferrous and Tibet Huayu

Assuming the 90 days trading horizon China Nonferrous Metal is expected to under-perform the Tibet Huayu. But the stock apears to be less risky and, when comparing its historical volatility, China Nonferrous Metal is 1.51 times less risky than Tibet Huayu. The stock trades about 0.0 of its potential returns per unit of risk. The Tibet Huayu Mining is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,297  in Tibet Huayu Mining on September 30, 2024 and sell it today you would earn a total of  28.00  from holding Tibet Huayu Mining or generate 2.16% return on investment over 90 days.

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

China Nonferrous Metal  vs.  Tibet Huayu Mining

China Nonferrous Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tibet Huayu Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tibet Huayu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Nonferrous and Tibet Huayu

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

The idea behind China Nonferrous Metal and Tibet Huayu Mining 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.