Correlation Between Hunan Tyen and Chinese Universe

Can any of the company-specific risk be diversified away by investing in both Hunan Tyen and Chinese Universe 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 Hunan Tyen and Chinese Universe into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan Tyen Machinery and Chinese Universe Publishing, you can compare the effects of market volatilities on Hunan Tyen and Chinese Universe 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 Hunan Tyen with a short position of Chinese Universe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Tyen and Chinese Universe.

Diversification Opportunities for Hunan Tyen and Chinese Universe

-0.56

Correlation Coefficient

Hunan Tyen  Chinese Universe

Excellent diversification

The 3 months correlation between Hunan and Chinese is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Tyen Machinery and Chinese Universe Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Universe Pub and Hunan Tyen 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 Hunan Tyen Machinery are associated (or correlated) with Chinese Universe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Universe Pub has no effect on the direction of Hunan Tyen i.e., Hunan Tyen and Chinese Universe go up and down completely randomly.

Pair Corralation between Hunan Tyen and Chinese Universe

Assuming the 90 days trading horizon Hunan Tyen Machinery is expected to generate 3.27 times more return on investment than Chinese Universe. However, Hunan Tyen is 3.27 times more volatile than Chinese Universe Publishing. It trades about 0.19 of its potential returns per unit of risk. Chinese Universe Publishing is currently generating about -0.19 per unit of risk. If you would invest  469.00  in Hunan Tyen Machinery on December 25, 2024 and sell it today you would earn a total of  224.00  from holding Hunan Tyen Machinery or generate 47.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Hunan Tyen Machinery  vs.  Chinese Universe Publishing

Hunan Tyen Machinery

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Tyen Machinery are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Tyen sustained solid returns over the last few months and may actually be approaching a breakup point.

Chinese Universe Pub

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chinese Universe Publishing 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hunan Tyen and Chinese Universe

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

The idea behind Hunan Tyen Machinery and Chinese Universe Publishing 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.