Correlation Between Tianshui Huatian and Sinofibers Technology

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

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

Diversification Opportunities for Tianshui Huatian and Sinofibers Technology

0.52

Correlation Coefficient

Tianshui Huatian  Sinofibers Technology

Very weak diversification

The 3 months correlation between Tianshui and Sinofibers is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tianshui Huatian Technology and Sinofibers Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinofibers Technology and Tianshui Huatian 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 Tianshui Huatian Technology are associated (or correlated) with Sinofibers Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinofibers Technology has no effect on the direction of Tianshui Huatian i.e., Tianshui Huatian and Sinofibers Technology go up and down completely randomly.

Pair Corralation between Tianshui Huatian and Sinofibers Technology

Assuming the 90 days trading horizon Tianshui Huatian Technology is expected to under-perform the Sinofibers Technology. But the stock apears to be less risky and, when comparing its historical volatility, Tianshui Huatian Technology is 1.04 times less risky than Sinofibers Technology. The stock trades about -0.04 of its potential returns per unit of risk. The Sinofibers Technology Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,898  in Sinofibers Technology Co on November 19, 2024 and sell it today you would lose (17.00) from holding Sinofibers Technology Co or give up 0.59% of portfolio value over 90 days.

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

Tianshui Huatian Technology  vs.  Sinofibers Technology Co

Tianshui Huatian Tec

Risk-Adjusted Performance

Very Weak

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

Sinofibers Technology

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Tianshui Huatian and Sinofibers Technology

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

The idea behind Tianshui Huatian Technology and Sinofibers Technology Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.