Correlation Between Tibet Huayu and Chenzhou Jingui

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Can any of the company-specific risk be diversified away by investing in both Tibet Huayu and Chenzhou Jingui 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 Tibet Huayu and Chenzhou Jingui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tibet Huayu Mining and Chenzhou Jingui Silver, you can compare the effects of market volatilities on Tibet Huayu and Chenzhou Jingui 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 Tibet Huayu with a short position of Chenzhou Jingui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tibet Huayu and Chenzhou Jingui.

Diversification Opportunities for Tibet Huayu and Chenzhou Jingui

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Tibet and Chenzhou is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining and Chenzhou Jingui Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chenzhou Jingui Silver and Tibet Huayu 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 Tibet Huayu Mining are associated (or correlated) with Chenzhou Jingui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chenzhou Jingui Silver has no effect on the direction of Tibet Huayu i.e., Tibet Huayu and Chenzhou Jingui go up and down completely randomly.

Pair Corralation between Tibet Huayu and Chenzhou Jingui

Assuming the 90 days trading horizon Tibet Huayu Mining is expected to under-perform the Chenzhou Jingui. But the stock apears to be less risky and, when comparing its historical volatility, Tibet Huayu Mining is 1.36 times less risky than Chenzhou Jingui. The stock trades about -0.5 of its potential returns per unit of risk. The Chenzhou Jingui Silver is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  387.00  in Chenzhou Jingui Silver on October 11, 2024 and sell it today you would lose (46.00) from holding Chenzhou Jingui Silver or give up 11.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Tibet Huayu Mining  vs.  Chenzhou Jingui Silver

 Performance 
       Timeline  
Tibet Huayu Mining 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Chenzhou Jingui Silver 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Chenzhou Jingui Silver are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chenzhou Jingui may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tibet Huayu and Chenzhou Jingui Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tibet Huayu and Chenzhou Jingui

The main advantage of trading using opposite Tibet Huayu and Chenzhou Jingui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tibet Huayu position performs unexpectedly, Chenzhou Jingui 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 Chenzhou Jingui will offset losses from the drop in Chenzhou Jingui's long position.
The idea behind Tibet Huayu Mining and Chenzhou Jingui Silver 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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