Correlation Between Haitai Confectionery and Tuksu Engineering

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

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

Diversification Opportunities for Haitai Confectionery and Tuksu Engineering

0.48

Correlation Coefficient

Haitai Confectionery  Tuksu Engineering

Very weak diversification

The 3 months correlation between Haitai and Tuksu is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Haitai Confectionery Foods and Tuksu Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tuksu Engineering and Haitai Confectionery 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 Haitai Confectionery Foods 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 Haitai Confectionery i.e., Haitai Confectionery and Tuksu Engineering go up and down completely randomly.

Pair Corralation between Haitai Confectionery and Tuksu Engineering

Assuming the 90 days trading horizon Haitai Confectionery Foods is expected to under-perform the Tuksu Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Haitai Confectionery Foods is 1.49 times less risky than Tuksu Engineering. The stock trades about -0.23 of its potential returns per unit of risk. The Tuksu Engineering ConstructionLtd is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  637,000  in Tuksu Engineering ConstructionLtd on October 23, 2024 and sell it today you would earn a total of  27,000  from holding Tuksu Engineering ConstructionLtd or generate 4.24% return on investment over 90 days.

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

Haitai Confectionery Foods  vs.  Tuksu Engineering Construction

Haitai Confectionery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haitai Confectionery Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Haitai Confectionery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tuksu Engineering

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tuksu Engineering ConstructionLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tuksu Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Haitai Confectionery and Tuksu Engineering

The main advantage of trading using opposite Haitai Confectionery and Tuksu Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haitai Confectionery 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 Haitai Confectionery Foods 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.