Correlation Between Tongxing Environmental and ShenZhen YUTO

Can any of the company-specific risk be diversified away by investing in both Tongxing Environmental and ShenZhen YUTO 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 Tongxing Environmental and ShenZhen YUTO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tongxing Environmental Protection and ShenZhen YUTO Packaging, you can compare the effects of market volatilities on Tongxing Environmental and ShenZhen YUTO 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 Tongxing Environmental with a short position of ShenZhen YUTO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tongxing Environmental and ShenZhen YUTO.

Diversification Opportunities for Tongxing Environmental and ShenZhen YUTO

0.05

Correlation Coefficient

Tongxing Environmental  ShenZhen YUTO

Significant diversification

The 3 months correlation between Tongxing and ShenZhen is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tongxing Environmental Protect and ShenZhen YUTO Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ShenZhen YUTO Packaging and Tongxing Environmental 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 Tongxing Environmental Protection are associated (or correlated) with ShenZhen YUTO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ShenZhen YUTO Packaging has no effect on the direction of Tongxing Environmental i.e., Tongxing Environmental and ShenZhen YUTO go up and down completely randomly.

Pair Corralation between Tongxing Environmental and ShenZhen YUTO

Assuming the 90 days trading horizon Tongxing Environmental Protection is expected to under-perform the ShenZhen YUTO. In addition to that, Tongxing Environmental is 1.64 times more volatile than ShenZhen YUTO Packaging. It trades about -0.22 of its total potential returns per unit of risk. ShenZhen YUTO Packaging is currently generating about 0.2 per unit of volatility. If you would invest  2,468  in ShenZhen YUTO Packaging on October 11, 2024 and sell it today you would earn a total of  198.00  from holding ShenZhen YUTO Packaging or generate 8.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Tongxing Environmental Protect  vs.  ShenZhen YUTO Packaging

Tongxing Environmental

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tongxing Environmental Protection are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongxing Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

ShenZhen YUTO Packaging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ShenZhen YUTO Packaging are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ShenZhen YUTO may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tongxing Environmental and ShenZhen YUTO

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

The idea behind Tongxing Environmental Protection and ShenZhen YUTO Packaging 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.