Correlation Between Tongxing Environmental and Xinya Electronic

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

Diversification Opportunities for Tongxing Environmental and Xinya Electronic

0.48

Correlation Coefficient

Tongxing Environmental  Xinya Electronic

Very weak diversification

The 3 months correlation between Tongxing and Xinya is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tongxing Environmental Protect and Xinya Electronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinya Electronic 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 Xinya Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinya Electronic has no effect on the direction of Tongxing Environmental i.e., Tongxing Environmental and Xinya Electronic go up and down completely randomly.

Pair Corralation between Tongxing Environmental and Xinya Electronic

Assuming the 90 days trading horizon Tongxing Environmental Protection is expected to under-perform the Xinya Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Tongxing Environmental Protection is 1.01 times less risky than Xinya Electronic. The stock trades about -0.01 of its potential returns per unit of risk. The Xinya Electronic Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,163  in Xinya Electronic Co on October 10, 2024 and sell it today you would earn a total of  304.00  from holding Xinya Electronic Co or generate 26.14% return on investment over 90 days.

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

Tongxing Environmental Protect  vs.  Xinya Electronic Co

Tongxing Environmental

Risk-Adjusted Performance

3 of 100

Insignificant

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.

Xinya Electronic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xinya Electronic Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinya Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tongxing Environmental and Xinya Electronic

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

The idea behind Tongxing Environmental Protection and Xinya Electronic 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.