Correlation Between Hannong Chemicals and Tuksu Engineering

Can any of the company-specific risk be diversified away by investing in both Hannong Chemicals and Tuksu Engineering 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 Hannong Chemicals and Tuksu Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hannong Chemicals and Tuksu Engineering ConstructionLtd, you can compare the effects of market volatilities on Hannong Chemicals and Tuksu Engineering 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 Hannong Chemicals with a short position of Tuksu Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hannong Chemicals and Tuksu Engineering.

Diversification Opportunities for Hannong Chemicals and Tuksu Engineering

-0.4

Correlation Coefficient

Hannong Chemicals  Tuksu Engineering

Very good diversification

The 3 months correlation between Hannong and Tuksu is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hannong Chemicals and Tuksu Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tuksu Engineering and Hannong Chemicals 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 Hannong Chemicals are associated (or correlated) with Tuksu Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tuksu Engineering has no effect on the direction of Hannong Chemicals i.e., Hannong Chemicals and Tuksu Engineering go up and down completely randomly.

Pair Corralation between Hannong Chemicals and Tuksu Engineering

Assuming the 90 days trading horizon Hannong Chemicals is expected to under-perform the Tuksu Engineering. In addition to that, Hannong Chemicals is 1.02 times more volatile than Tuksu Engineering ConstructionLtd. It trades about -0.1 of its total potential returns per unit of risk. Tuksu Engineering ConstructionLtd is currently generating about 0.08 per unit of volatility. If you would invest  597,000  in Tuksu Engineering ConstructionLtd on September 17, 2024 and sell it today you would earn a total of  88,000  from holding Tuksu Engineering ConstructionLtd or generate 14.74% return on investment over 90 days.

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

Hannong Chemicals  vs.  Tuksu Engineering Construction

Hannong Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hannong Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tuksu Engineering

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tuksu Engineering ConstructionLtd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tuksu Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hannong Chemicals and Tuksu Engineering

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

The idea behind Hannong Chemicals and Tuksu Engineering ConstructionLtd 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 Valuation module to check real value of public entities based on technical and fundamental data.