Correlation Between Tibet Huayu and Jiangxi Naipu

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

Diversification Opportunities for Tibet Huayu and Jiangxi Naipu

0.79

Correlation Coefficient

Tibet Huayu  Jiangxi Naipu

Poor diversification

The 3 months correlation between Tibet and Jiangxi is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining and Jiangxi Naipu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Naipu Mining 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 Jiangxi Naipu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Naipu Mining has no effect on the direction of Tibet Huayu i.e., Tibet Huayu and Jiangxi Naipu go up and down completely randomly.

Pair Corralation between Tibet Huayu and Jiangxi Naipu

Assuming the 90 days trading horizon Tibet Huayu Mining is expected to generate 1.6 times more return on investment than Jiangxi Naipu. However, Tibet Huayu is 1.6 times more volatile than Jiangxi Naipu Mining. It trades about 0.03 of its potential returns per unit of risk. Jiangxi Naipu Mining is currently generating about 0.04 per unit of risk. If you would invest  1,364  in Tibet Huayu Mining on September 22, 2024 and sell it today you would earn a total of  13.00  from holding Tibet Huayu Mining or generate 0.95% return on investment over 90 days.

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

Tibet Huayu Mining  vs.  Jiangxi Naipu Mining

Tibet Huayu Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangxi Naipu Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangxi Naipu Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangxi Naipu sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tibet Huayu and Jiangxi Naipu

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

The idea behind Tibet Huayu Mining and Jiangxi Naipu 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.