Correlation Between Shijiazhuang Tonhe and China World

Can any of the company-specific risk be diversified away by investing in both Shijiazhuang Tonhe and China World 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 Shijiazhuang Tonhe and China World into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shijiazhuang Tonhe Electronics and China World Trade, you can compare the effects of market volatilities on Shijiazhuang Tonhe and China World 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 Shijiazhuang Tonhe with a short position of China World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shijiazhuang Tonhe and China World.

Diversification Opportunities for Shijiazhuang Tonhe and China World

0.09

Correlation Coefficient

Shijiazhuang Tonhe  China World

Significant diversification

The 3 months correlation between Shijiazhuang and China is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Shijiazhuang Tonhe Electronics and China World Trade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China World Trade and Shijiazhuang Tonhe 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 Shijiazhuang Tonhe Electronics are associated (or correlated) with China World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China World Trade has no effect on the direction of Shijiazhuang Tonhe i.e., Shijiazhuang Tonhe and China World go up and down completely randomly.

Pair Corralation between Shijiazhuang Tonhe and China World

Assuming the 90 days trading horizon Shijiazhuang Tonhe Electronics is expected to under-perform the China World. In addition to that, Shijiazhuang Tonhe is 1.98 times more volatile than China World Trade. It trades about -0.03 of its total potential returns per unit of risk. China World Trade is currently generating about -0.01 per unit of volatility. If you would invest  2,425  in China World Trade on October 9, 2024 and sell it today you would lose (39.00) from holding China World Trade or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Shijiazhuang Tonhe Electronics  vs.  China World Trade

Shijiazhuang Tonhe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shijiazhuang Tonhe Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shijiazhuang Tonhe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China World Trade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China World Trade has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shijiazhuang Tonhe and China World

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

The idea behind Shijiazhuang Tonhe Electronics and China World Trade 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 Anywhere module to track or share privately all of your investments from the convenience of any device.