Correlation Between China Securities and Tangel Publishing

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

By analyzing existing cross correlation between China Securities 800 and Tangel Publishing, you can compare the effects of market volatilities on China Securities and Tangel Publishing 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 Securities with a short position of Tangel Publishing. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Securities and Tangel Publishing.

Diversification Opportunities for China Securities and Tangel Publishing

0.76

Correlation Coefficient

China Securities  Tangel Publishing

Poor diversification

The 3 months correlation between China and Tangel is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Securities 800 and Tangel Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tangel Publishing and China Securities 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 Securities 800 are associated (or correlated) with Tangel Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tangel Publishing has no effect on the direction of China Securities i.e., China Securities and Tangel Publishing go up and down completely randomly.

Pair Corralation between China Securities and Tangel Publishing

Assuming the 90 days trading horizon China Securities 800 is expected to under-perform the Tangel Publishing. But the index apears to be less risky and, when comparing its historical volatility, China Securities 800 is 4.53 times less risky than Tangel Publishing. The index trades about -0.01 of its potential returns per unit of risk. The Tangel Publishing is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  388.00  in Tangel Publishing on December 26, 2024 and sell it today you would earn a total of  54.00  from holding Tangel Publishing or generate 13.92% return on investment over 90 days.

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

China Securities 800  vs.  Tangel Publishing

Pair Trading with China Securities and Tangel Publishing

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

The idea behind China Securities 800 and Tangel Publishing 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.