Correlation Between State Grid and Tongling Nonferrous

Can any of the company-specific risk be diversified away by investing in both State Grid and Tongling Nonferrous 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 State Grid and Tongling Nonferrous into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between State Grid InformationCommunication and Tongling Nonferrous Metals, you can compare the effects of market volatilities on State Grid and Tongling Nonferrous 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 State Grid with a short position of Tongling Nonferrous. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Tongling Nonferrous.

Diversification Opportunities for State Grid and Tongling Nonferrous

0.3

Correlation Coefficient

State Grid  Tongling Nonferrous

Weak diversification

The 3 months correlation between State and Tongling is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Tongling Nonferrous Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongling Nonferrous and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Tongling Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongling Nonferrous has no effect on the direction of State Grid i.e., State Grid and Tongling Nonferrous go up and down completely randomly.

Pair Corralation between State Grid and Tongling Nonferrous

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to generate 1.34 times more return on investment than Tongling Nonferrous. However, State Grid is 1.34 times more volatile than Tongling Nonferrous Metals. It trades about 0.02 of its potential returns per unit of risk. Tongling Nonferrous Metals is currently generating about 0.01 per unit of risk. If you would invest  1,722  in State Grid InformationCommunication on October 10, 2024 and sell it today you would earn a total of  58.00  from holding State Grid InformationCommunication or generate 3.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

State Grid InformationCommunic  vs.  Tongling Nonferrous Metals

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tongling Nonferrous

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tongling Nonferrous Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with State Grid and Tongling Nonferrous

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

The idea behind State Grid InformationCommunication and Tongling Nonferrous Metals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.