Correlation Between Tengda Construction and Tibet Huayu

Can any of the company-specific risk be diversified away by investing in both Tengda Construction 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 Tengda Construction and Tibet Huayu 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 Tibet Huayu Mining, you can compare the effects of market volatilities on Tengda Construction 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 Tengda Construction with a short position of Tibet Huayu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tengda Construction and Tibet Huayu.

Diversification Opportunities for Tengda Construction and Tibet Huayu

0.8

Correlation Coefficient

Tengda Construction  Tibet Huayu

Very poor diversification

The 3 months correlation between Tengda and Tibet is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tengda Construction Group 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 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 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 Tengda Construction i.e., Tengda Construction and Tibet Huayu go up and down completely randomly.

Pair Corralation between Tengda Construction and Tibet Huayu

Assuming the 90 days trading horizon Tengda Construction Group is expected to generate 0.82 times more return on investment than Tibet Huayu. However, Tengda Construction Group is 1.21 times less risky than Tibet Huayu. It trades about -0.08 of its potential returns per unit of risk. Tibet Huayu Mining is currently generating about -0.19 per unit of risk. If you would invest  244.00  in Tengda Construction Group on October 6, 2024 and sell it today you would lose (21.00) from holding Tengda Construction Group or give up 8.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.73%
Values	Daily Returns

Tengda Construction Group  vs.  Tibet Huayu Mining

Tengda Construction

Risk-Adjusted Performance

0 of 100

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.

Tibet Huayu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tibet Huayu Mining 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 Tengda Construction and Tibet Huayu

The main advantage of trading using opposite Tengda Construction and Tibet Huayu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tengda Construction 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 Tengda Construction Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.