Correlation Between Shaanxi Construction and Tieling Newcity

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

By analyzing existing cross correlation between Shaanxi Construction Machinery and Tieling Newcity Investment, you can compare the effects of market volatilities on Shaanxi Construction and Tieling Newcity 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 Shaanxi Construction with a short position of Tieling Newcity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaanxi Construction and Tieling Newcity.

Diversification Opportunities for Shaanxi Construction and Tieling Newcity

0.51

Correlation Coefficient

Shaanxi Construction  Tieling Newcity

Very weak diversification

The 3 months correlation between Shaanxi and Tieling is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Shaanxi Construction Machinery and Tieling Newcity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tieling Newcity Inve and Shaanxi 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 Shaanxi Construction Machinery are associated (or correlated) with Tieling Newcity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tieling Newcity Inve has no effect on the direction of Shaanxi Construction i.e., Shaanxi Construction and Tieling Newcity go up and down completely randomly.

Pair Corralation between Shaanxi Construction and Tieling Newcity

Assuming the 90 days trading horizon Shaanxi Construction Machinery is expected to under-perform the Tieling Newcity. In addition to that, Shaanxi Construction is 1.2 times more volatile than Tieling Newcity Investment. It trades about -0.11 of its total potential returns per unit of risk. Tieling Newcity Investment is currently generating about 0.14 per unit of volatility. If you would invest  300.00  in Tieling Newcity Investment on October 10, 2024 and sell it today you would earn a total of  30.00  from holding Tieling Newcity Investment or generate 10.0% return on investment over 90 days.

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

Shaanxi Construction Machinery  vs.  Tieling Newcity Investment

Shaanxi Construction

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Construction Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shaanxi Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Tieling Newcity Inve

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tieling Newcity Investment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tieling Newcity sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shaanxi Construction and Tieling Newcity

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

The idea behind Shaanxi Construction Machinery and Tieling Newcity Investment 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..