Correlation Between Tengda Construction and Nanjing OLO

Can any of the company-specific risk be diversified away by investing in both Tengda Construction and Nanjing OLO 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 Nanjing OLO 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 Nanjing OLO Home, you can compare the effects of market volatilities on Tengda Construction and Nanjing OLO 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 Nanjing OLO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tengda Construction and Nanjing OLO.

Diversification Opportunities for Tengda Construction and Nanjing OLO

0.7

Correlation Coefficient

Tengda Construction  Nanjing OLO

Poor diversification

The 3 months correlation between Tengda and Nanjing is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tengda Construction Group and Nanjing OLO Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing OLO Home 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 Nanjing OLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing OLO Home has no effect on the direction of Tengda Construction i.e., Tengda Construction and Nanjing OLO go up and down completely randomly.

Pair Corralation between Tengda Construction and Nanjing OLO

Assuming the 90 days trading horizon Tengda Construction Group is expected to under-perform the Nanjing OLO. But the stock apears to be less risky and, when comparing its historical volatility, Tengda Construction Group is 1.37 times less risky than Nanjing OLO. The stock trades about -0.08 of its potential returns per unit of risk. The Nanjing OLO Home is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  622.00  in Nanjing OLO Home on October 6, 2024 and sell it today you would lose (51.00) from holding Nanjing OLO Home or give up 8.2% of portfolio value over 90 days.

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

Tengda Construction Group  vs.  Nanjing OLO Home

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.

Nanjing OLO Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nanjing OLO Home has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tengda Construction and Nanjing OLO

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

The idea behind Tengda Construction Group and Nanjing OLO Home 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.