Correlation Between Tongxing Environmental and SIASUN Robot

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

Diversification Opportunities for Tongxing Environmental and SIASUN Robot

0.81

Correlation Coefficient

Tongxing Environmental  SIASUN Robot

Very poor diversification

The 3 months correlation between Tongxing and SIASUN is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tongxing Environmental Protect and SIASUN Robot Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIASUN Robot Automation 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 SIASUN Robot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIASUN Robot Automation has no effect on the direction of Tongxing Environmental i.e., Tongxing Environmental and SIASUN Robot go up and down completely randomly.

Pair Corralation between Tongxing Environmental and SIASUN Robot

Assuming the 90 days trading horizon Tongxing Environmental Protection is expected to generate 0.88 times more return on investment than SIASUN Robot. However, Tongxing Environmental Protection is 1.14 times less risky than SIASUN Robot. It trades about 0.02 of its potential returns per unit of risk. SIASUN Robot Automation is currently generating about -0.09 per unit of risk. If you would invest  1,421  in Tongxing Environmental Protection on October 9, 2024 and sell it today you would lose (10.00) from holding Tongxing Environmental Protection or give up 0.7% of portfolio value over 90 days.

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

Tongxing Environmental Protect  vs.  SIASUN Robot Automation

Tongxing Environmental

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tongxing Environmental Protection are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongxing Environmental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SIASUN Robot Automation

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SIASUN Robot Automation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SIASUN Robot sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tongxing Environmental and SIASUN Robot

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

The idea behind Tongxing Environmental Protection and SIASUN Robot Automation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.