Correlation Between Tieling Newcity and Shengtak New

Can any of the company-specific risk be diversified away by investing in both Tieling Newcity and Shengtak New 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 Tieling Newcity and Shengtak New into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tieling Newcity Investment and Shengtak New Material, you can compare the effects of market volatilities on Tieling Newcity and Shengtak New 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 Tieling Newcity with a short position of Shengtak New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tieling Newcity and Shengtak New.

Diversification Opportunities for Tieling Newcity and Shengtak New

0.14

Correlation Coefficient

Tieling Newcity  Shengtak New

Average diversification

The 3 months correlation between Tieling and Shengtak is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Tieling Newcity Investment and Shengtak New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengtak New Material and Tieling Newcity 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 Tieling Newcity Investment are associated (or correlated) with Shengtak New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengtak New Material has no effect on the direction of Tieling Newcity i.e., Tieling Newcity and Shengtak New go up and down completely randomly.

Pair Corralation between Tieling Newcity and Shengtak New

Assuming the 90 days trading horizon Tieling Newcity Investment is expected to under-perform the Shengtak New. But the stock apears to be less risky and, when comparing its historical volatility, Tieling Newcity Investment is 1.35 times less risky than Shengtak New. The stock trades about -0.02 of its potential returns per unit of risk. The Shengtak New Material is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,164  in Shengtak New Material on September 30, 2024 and sell it today you would lose (7.00) from holding Shengtak New Material or give up 0.22% of portfolio value over 90 days.

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

Tieling Newcity Investment  vs.  Shengtak New Material

Tieling Newcity Inve

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tieling Newcity Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tieling Newcity sustained solid returns over the last few months and may actually be approaching a breakup point.

Shengtak New Material

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tieling Newcity and Shengtak New

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

The idea behind Tieling Newcity Investment and Shengtak New Material 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.