Correlation Between Strait Innovation and Tongxing Environmental

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

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

Diversification Opportunities for Strait Innovation and Tongxing Environmental

0.86

Correlation Coefficient

Strait Innovation  Tongxing Environmental

Very poor diversification

The 3 months correlation between Strait and Tongxing is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Strait Innovation Internet and Tongxing Environmental Protect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongxing Environmental and Strait Innovation 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 Strait Innovation Internet are associated (or correlated) with Tongxing Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongxing Environmental has no effect on the direction of Strait Innovation i.e., Strait Innovation and Tongxing Environmental go up and down completely randomly.

Pair Corralation between Strait Innovation and Tongxing Environmental

Assuming the 90 days trading horizon Strait Innovation Internet is expected to generate 0.63 times more return on investment than Tongxing Environmental. However, Strait Innovation Internet is 1.58 times less risky than Tongxing Environmental. It trades about 0.09 of its potential returns per unit of risk. Tongxing Environmental Protection is currently generating about 0.03 per unit of risk. If you would invest  303.00  in Strait Innovation Internet on September 22, 2024 and sell it today you would earn a total of  16.00  from holding Strait Innovation Internet or generate 5.28% return on investment over 90 days.

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

Strait Innovation Internet  vs.  Tongxing Environmental Protect

Strait Innovation

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Strait Innovation Internet are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Strait Innovation sustained solid returns over the last few months and may actually be approaching a breakup point.

Tongxing Environmental

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tongxing Environmental Protection are ranked lower than 12 (%) 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.

Pair Trading with Strait Innovation and Tongxing Environmental

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

The idea behind Strait Innovation Internet and Tongxing Environmental Protection 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.