Correlation Between Tibet Huayu and Leaguer Shenzhen

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

Diversification Opportunities for Tibet Huayu and Leaguer Shenzhen

0.09

Correlation Coefficient

Tibet Huayu  Leaguer Shenzhen

Significant diversification

The 3 months correlation between Tibet and Leaguer is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining and Leaguer Shenzhen MicroElectron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leaguer Shenzhen Mic 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 Leaguer Shenzhen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leaguer Shenzhen Mic has no effect on the direction of Tibet Huayu i.e., Tibet Huayu and Leaguer Shenzhen go up and down completely randomly.

Pair Corralation between Tibet Huayu and Leaguer Shenzhen

Assuming the 90 days trading horizon Tibet Huayu Mining is expected to generate 1.02 times more return on investment than Leaguer Shenzhen. However, Tibet Huayu is 1.02 times more volatile than Leaguer Shenzhen MicroElectronics. It trades about 0.04 of its potential returns per unit of risk. Leaguer Shenzhen MicroElectronics is currently generating about 0.01 per unit of risk. If you would invest  872.00  in Tibet Huayu Mining on October 2, 2024 and sell it today you would earn a total of  390.00  from holding Tibet Huayu Mining or generate 44.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Tibet Huayu Mining  vs.  Leaguer Shenzhen MicroElectron

Tibet Huayu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tibet Huayu Mining has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Leaguer Shenzhen Mic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leaguer Shenzhen MicroElectronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Leaguer Shenzhen 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 Leaguer Shenzhen

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

The idea behind Tibet Huayu Mining and Leaguer Shenzhen MicroElectronics 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.