Correlation Between Yuan Longping and Tianshui Huatian

Can any of the company-specific risk be diversified away by investing in both Yuan Longping and Tianshui Huatian 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 Yuan Longping and Tianshui Huatian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yuan Longping High tech and Tianshui Huatian Technology, you can compare the effects of market volatilities on Yuan Longping and Tianshui Huatian 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 Yuan Longping with a short position of Tianshui Huatian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuan Longping and Tianshui Huatian.

Diversification Opportunities for Yuan Longping and Tianshui Huatian

0.75

Correlation Coefficient

Yuan Longping  Tianshui Huatian

Poor diversification

The 3 months correlation between Yuan and Tianshui is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Yuan Longping High tech and Tianshui Huatian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshui Huatian Tec and Yuan Longping 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 Yuan Longping High tech are associated (or correlated) with Tianshui Huatian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshui Huatian Tec has no effect on the direction of Yuan Longping i.e., Yuan Longping and Tianshui Huatian go up and down completely randomly.

Pair Corralation between Yuan Longping and Tianshui Huatian

Assuming the 90 days trading horizon Yuan Longping High tech is expected to under-perform the Tianshui Huatian. In addition to that, Yuan Longping is 1.08 times more volatile than Tianshui Huatian Technology. It trades about -0.11 of its total potential returns per unit of risk. Tianshui Huatian Technology is currently generating about -0.09 per unit of volatility. If you would invest  1,209  in Tianshui Huatian Technology on October 25, 2024 and sell it today you would lose (66.00) from holding Tianshui Huatian Technology or give up 5.46% of portfolio value over 90 days.

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

Yuan Longping High tech  vs.  Tianshui Huatian Technology

Yuan Longping High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yuan Longping High tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Tianshui Huatian Tec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshui Huatian Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianshui Huatian may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Yuan Longping and Tianshui Huatian

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

The idea behind Yuan Longping High tech and Tianshui Huatian Technology 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.