Correlation Between Tongyu Communication and Qingdao Choho

Can any of the company-specific risk be diversified away by investing in both Tongyu Communication and Qingdao Choho 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 Tongyu Communication and Qingdao Choho into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tongyu Communication and Qingdao Choho Industrial, you can compare the effects of market volatilities on Tongyu Communication and Qingdao Choho 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 Tongyu Communication with a short position of Qingdao Choho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tongyu Communication and Qingdao Choho.

Diversification Opportunities for Tongyu Communication and Qingdao Choho

0.58

Correlation Coefficient

Tongyu Communication  Qingdao Choho

Very weak diversification

The 3 months correlation between Tongyu and Qingdao is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Tongyu Communication and Qingdao Choho Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Choho Industrial and Tongyu Communication 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 Tongyu Communication are associated (or correlated) with Qingdao Choho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Choho Industrial has no effect on the direction of Tongyu Communication i.e., Tongyu Communication and Qingdao Choho go up and down completely randomly.

Pair Corralation between Tongyu Communication and Qingdao Choho

Assuming the 90 days trading horizon Tongyu Communication is expected to under-perform the Qingdao Choho. But the stock apears to be less risky and, when comparing its historical volatility, Tongyu Communication is 1.79 times less risky than Qingdao Choho. The stock trades about -0.02 of its potential returns per unit of risk. The Qingdao Choho Industrial is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,762  in Qingdao Choho Industrial on December 26, 2024 and sell it today you would earn a total of  2,563  from holding Qingdao Choho Industrial or generate 92.8% return on investment over 90 days.

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

Tongyu Communication  vs.  Qingdao Choho Industrial

Tongyu Communication

Risk-Adjusted Performance

Weak

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

Qingdao Choho Industrial

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Choho Industrial are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Choho sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tongyu Communication and Qingdao Choho

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

The idea behind Tongyu Communication and Qingdao Choho Industrial 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 CEOs Directory module to screen CEOs from public companies around the world.