Correlation Between Konfoong Materials and Sichuan Tianqi

Can any of the company-specific risk be diversified away by investing in both Konfoong Materials and Sichuan Tianqi 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 Konfoong Materials and Sichuan Tianqi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Konfoong Materials International and Sichuan Tianqi Lithium, you can compare the effects of market volatilities on Konfoong Materials and Sichuan Tianqi 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 Konfoong Materials with a short position of Sichuan Tianqi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Konfoong Materials and Sichuan Tianqi.

Diversification Opportunities for Konfoong Materials and Sichuan Tianqi

0.62

Correlation Coefficient

Konfoong Materials  Sichuan Tianqi

Poor diversification

The 3 months correlation between Konfoong and Sichuan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Konfoong Materials Internation and Sichuan Tianqi Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Tianqi Lithium and Konfoong Materials 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 Konfoong Materials International are associated (or correlated) with Sichuan Tianqi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Tianqi Lithium has no effect on the direction of Konfoong Materials i.e., Konfoong Materials and Sichuan Tianqi go up and down completely randomly.

Pair Corralation between Konfoong Materials and Sichuan Tianqi

Assuming the 90 days trading horizon Konfoong Materials International is expected to under-perform the Sichuan Tianqi. In addition to that, Konfoong Materials is 1.15 times more volatile than Sichuan Tianqi Lithium. It trades about -0.09 of its total potential returns per unit of risk. Sichuan Tianqi Lithium is currently generating about -0.08 per unit of volatility. If you would invest  3,428  in Sichuan Tianqi Lithium on October 23, 2024 and sell it today you would lose (122.00) from holding Sichuan Tianqi Lithium or give up 3.56% of portfolio value over 90 days.

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

Konfoong Materials Internation  vs.  Sichuan Tianqi Lithium

Konfoong Materials

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Konfoong Materials International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Konfoong Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sichuan Tianqi Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Konfoong Materials and Sichuan Tianqi

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

The idea behind Konfoong Materials International and Sichuan Tianqi Lithium 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.