Correlation Between Tianshui Huatian and Cansino Biologics

Can any of the company-specific risk be diversified away by investing in both Tianshui Huatian and Cansino Biologics 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 Cansino Biologics 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 Cansino Biologics, you can compare the effects of market volatilities on Tianshui Huatian and Cansino Biologics 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 Cansino Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianshui Huatian and Cansino Biologics.

Diversification Opportunities for Tianshui Huatian and Cansino Biologics

0.86

Correlation Coefficient

Tianshui Huatian  Cansino Biologics

Very poor diversification

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

Pair Corralation between Tianshui Huatian and Cansino Biologics

Assuming the 90 days trading horizon Tianshui Huatian Technology is expected to generate 0.73 times more return on investment than Cansino Biologics. However, Tianshui Huatian Technology is 1.37 times less risky than Cansino Biologics. It trades about 0.21 of its potential returns per unit of risk. Cansino Biologics is currently generating about 0.15 per unit of risk. If you would invest  773.00  in Tianshui Huatian Technology on September 25, 2024 and sell it today you would earn a total of  420.00  from holding Tianshui Huatian Technology or generate 54.33% return on investment over 90 days.

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

Tianshui Huatian Technology  vs.  Cansino Biologics

Tianshui Huatian Tec

Risk-Adjusted Performance

16 of 100

Solid

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

Cansino Biologics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cansino Biologics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cansino Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianshui Huatian and Cansino Biologics

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

The idea behind Tianshui Huatian Technology and Cansino Biologics 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.