Correlation Between Rongcheer Industrial and Tibet Huayu

Can any of the company-specific risk be diversified away by investing in both Rongcheer Industrial and Tibet Huayu 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 Rongcheer Industrial and Tibet Huayu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rongcheer Industrial Technology and Tibet Huayu Mining, you can compare the effects of market volatilities on Rongcheer Industrial and Tibet Huayu 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 Rongcheer Industrial with a short position of Tibet Huayu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongcheer Industrial and Tibet Huayu.

Diversification Opportunities for Rongcheer Industrial and Tibet Huayu

0.77

Correlation Coefficient

Rongcheer Industrial  Tibet Huayu

Poor diversification

The 3 months correlation between Rongcheer and Tibet is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Rongcheer Industrial Technolog and Tibet Huayu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tibet Huayu Mining and Rongcheer Industrial 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 Rongcheer Industrial Technology are associated (or correlated) with Tibet Huayu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tibet Huayu Mining has no effect on the direction of Rongcheer Industrial i.e., Rongcheer Industrial and Tibet Huayu go up and down completely randomly.

Pair Corralation between Rongcheer Industrial and Tibet Huayu

Assuming the 90 days trading horizon Rongcheer Industrial Technology is expected to generate 1.27 times more return on investment than Tibet Huayu. However, Rongcheer Industrial is 1.27 times more volatile than Tibet Huayu Mining. It trades about 0.13 of its potential returns per unit of risk. Tibet Huayu Mining is currently generating about 0.13 per unit of risk. If you would invest  4,250  in Rongcheer Industrial Technology on September 22, 2024 and sell it today you would earn a total of  1,502  from holding Rongcheer Industrial Technology or generate 35.34% return on investment over 90 days.

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

Rongcheer Industrial Technolog  vs.  Tibet Huayu Mining

Rongcheer Industrial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rongcheer Industrial Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rongcheer Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Tibet Huayu Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rongcheer Industrial and Tibet Huayu

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

The idea behind Rongcheer Industrial Technology and Tibet Huayu Mining 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.