Correlation Between TongFu Microelectronics and Xinjiang Tianrun

Can any of the company-specific risk be diversified away by investing in both TongFu Microelectronics and Xinjiang Tianrun 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 TongFu Microelectronics and Xinjiang Tianrun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TongFu Microelectronics Co and Xinjiang Tianrun Dairy, you can compare the effects of market volatilities on TongFu Microelectronics and Xinjiang Tianrun 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 TongFu Microelectronics with a short position of Xinjiang Tianrun. Check out your portfolio center. Please also check ongoing floating volatility patterns of TongFu Microelectronics and Xinjiang Tianrun.

Diversification Opportunities for TongFu Microelectronics and Xinjiang Tianrun

0.86

Correlation Coefficient

TongFu Microelectronics  Xinjiang Tianrun

Very poor diversification

The 3 months correlation between TongFu and Xinjiang is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding TongFu Microelectronics Co and Xinjiang Tianrun Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Tianrun Dairy and TongFu Microelectronics 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 TongFu Microelectronics Co are associated (or correlated) with Xinjiang Tianrun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Tianrun Dairy has no effect on the direction of TongFu Microelectronics i.e., TongFu Microelectronics and Xinjiang Tianrun go up and down completely randomly.

Pair Corralation between TongFu Microelectronics and Xinjiang Tianrun

Assuming the 90 days trading horizon TongFu Microelectronics Co is expected to under-perform the Xinjiang Tianrun. But the stock apears to be less risky and, when comparing its historical volatility, TongFu Microelectronics Co is 1.24 times less risky than Xinjiang Tianrun. The stock trades about -0.09 of its potential returns per unit of risk. The Xinjiang Tianrun Dairy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  942.00  in Xinjiang Tianrun Dairy on September 22, 2024 and sell it today you would earn a total of  55.00  from holding Xinjiang Tianrun Dairy or generate 5.84% return on investment over 90 days.

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

TongFu Microelectronics Co  vs.  Xinjiang Tianrun Dairy

TongFu Microelectronics

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TongFu Microelectronics Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TongFu Microelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Xinjiang Tianrun Dairy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Tianrun Dairy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Tianrun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TongFu Microelectronics and Xinjiang Tianrun

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

The idea behind TongFu Microelectronics Co and Xinjiang Tianrun Dairy 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.