Correlation Between Tibet Huayu and Nanning Chemical

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

Diversification Opportunities for Tibet Huayu and Nanning Chemical

0.91

Correlation Coefficient

Tibet Huayu  Nanning Chemical

Almost no diversification

The 3 months correlation between Tibet and Nanning is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining and Nanning Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanning Chemical Industry 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 Nanning Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanning Chemical Industry has no effect on the direction of Tibet Huayu i.e., Tibet Huayu and Nanning Chemical go up and down completely randomly.

Pair Corralation between Tibet Huayu and Nanning Chemical

Assuming the 90 days trading horizon Tibet Huayu Mining is expected to generate 1.33 times more return on investment than Nanning Chemical. However, Tibet Huayu is 1.33 times more volatile than Nanning Chemical Industry. It trades about 0.03 of its potential returns per unit of risk. Nanning Chemical Industry is currently generating about 0.03 per unit of risk. If you would invest  1,233  in Tibet Huayu Mining on October 23, 2024 and sell it today you would earn a total of  38.00  from holding Tibet Huayu Mining or generate 3.08% return on investment over 90 days.

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

Tibet Huayu Mining  vs.  Nanning Chemical Industry

Tibet Huayu Mining

Risk-Adjusted Performance

2 of 100

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 strong basic indicators, Tibet Huayu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nanning Chemical Industry

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nanning Chemical Industry are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nanning Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tibet Huayu and Nanning Chemical

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

The idea behind Tibet Huayu Mining and Nanning Chemical Industry 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.