Correlation Between Tengda Construction and Sichuan Jinshi

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

By analyzing existing cross correlation between Tengda Construction Group and Sichuan Jinshi Technology, you can compare the effects of market volatilities on Tengda Construction and Sichuan Jinshi 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 Tengda Construction with a short position of Sichuan Jinshi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tengda Construction and Sichuan Jinshi.

Diversification Opportunities for Tengda Construction and Sichuan Jinshi

-0.03

Correlation Coefficient

Tengda Construction  Sichuan Jinshi

Good diversification

The 3 months correlation between Tengda and Sichuan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Tengda Construction Group and Sichuan Jinshi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Jinshi Technology and Tengda Construction 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 Tengda Construction Group are associated (or correlated) with Sichuan Jinshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Jinshi Technology has no effect on the direction of Tengda Construction i.e., Tengda Construction and Sichuan Jinshi go up and down completely randomly.

Pair Corralation between Tengda Construction and Sichuan Jinshi

Assuming the 90 days trading horizon Tengda Construction Group is expected to under-perform the Sichuan Jinshi. But the stock apears to be less risky and, when comparing its historical volatility, Tengda Construction Group is 1.82 times less risky than Sichuan Jinshi. The stock trades about -0.02 of its potential returns per unit of risk. The Sichuan Jinshi Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  644.00  in Sichuan Jinshi Technology on December 26, 2024 and sell it today you would earn a total of  84.00  from holding Sichuan Jinshi Technology or generate 13.04% return on investment over 90 days.

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

Tengda Construction Group  vs.  Sichuan Jinshi Technology

Tengda Construction

Risk-Adjusted Performance

Very Weak

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

Sichuan Jinshi Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tengda Construction and Sichuan Jinshi

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

The idea behind Tengda Construction Group and Sichuan Jinshi Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.