Correlation Between Tonghua Grape and Sany Heavy

Can any of the company-specific risk be diversified away by investing in both Tonghua Grape and Sany Heavy 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 Tonghua Grape and Sany Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tonghua Grape Wine and Sany Heavy Energy, you can compare the effects of market volatilities on Tonghua Grape and Sany Heavy 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 Tonghua Grape with a short position of Sany Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tonghua Grape and Sany Heavy.

Diversification Opportunities for Tonghua Grape and Sany Heavy

0.69

Correlation Coefficient

Tonghua Grape  Sany Heavy

Poor diversification

The 3 months correlation between Tonghua and Sany is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tonghua Grape Wine and Sany Heavy Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sany Heavy Energy and Tonghua Grape 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 Tonghua Grape Wine are associated (or correlated) with Sany Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sany Heavy Energy has no effect on the direction of Tonghua Grape i.e., Tonghua Grape and Sany Heavy go up and down completely randomly.

Pair Corralation between Tonghua Grape and Sany Heavy

Assuming the 90 days trading horizon Tonghua Grape is expected to generate 5.69 times less return on investment than Sany Heavy. But when comparing it to its historical volatility, Tonghua Grape Wine is 1.12 times less risky than Sany Heavy. It trades about 0.0 of its potential returns per unit of risk. Sany Heavy Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,764  in Sany Heavy Energy on October 9, 2024 and sell it today you would earn a total of  71.00  from holding Sany Heavy Energy or generate 2.57% return on investment over 90 days.

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

Tonghua Grape Wine  vs.  Sany Heavy Energy

Tonghua Grape Wine

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tonghua Grape Wine are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tonghua Grape is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sany Heavy Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tonghua Grape and Sany Heavy

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

The idea behind Tonghua Grape Wine and Sany Heavy Energy 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.