Correlation Between Tibet Huayu and Keda Clean

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

Diversification Opportunities for Tibet Huayu and Keda Clean

0.67

Correlation Coefficient

Tibet Huayu  Keda Clean

Poor diversification

The 3 months correlation between Tibet and Keda is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining and Keda Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keda Clean Energy 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 Keda Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keda Clean Energy has no effect on the direction of Tibet Huayu i.e., Tibet Huayu and Keda Clean go up and down completely randomly.

Pair Corralation between Tibet Huayu and Keda Clean

Assuming the 90 days trading horizon Tibet Huayu Mining is expected to generate 1.67 times more return on investment than Keda Clean. However, Tibet Huayu is 1.67 times more volatile than Keda Clean Energy. It trades about 0.05 of its potential returns per unit of risk. Keda Clean Energy is currently generating about -0.03 per unit of risk. If you would invest  859.00  in Tibet Huayu Mining on October 22, 2024 and sell it today you would earn a total of  417.00  from holding Tibet Huayu Mining or generate 48.54% 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.  Keda Clean Energy

Tibet Huayu Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 1 (%) 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.

Keda Clean Energy

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Keda Clean Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Keda Clean may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tibet Huayu and Keda Clean

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

The idea behind Tibet Huayu Mining and Keda Clean Energy 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.