Correlation Between Sinotrans and Tongling Nonferrous

Can any of the company-specific risk be diversified away by investing in both Sinotrans and Tongling Nonferrous 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 Sinotrans and Tongling Nonferrous into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sinotrans Ltd Class and Tongling Nonferrous Metals, you can compare the effects of market volatilities on Sinotrans and Tongling Nonferrous 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 Sinotrans with a short position of Tongling Nonferrous. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinotrans and Tongling Nonferrous.

Diversification Opportunities for Sinotrans and Tongling Nonferrous

-0.2

Correlation Coefficient

Sinotrans  Tongling Nonferrous

Good diversification

The 3 months correlation between Sinotrans and Tongling is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sinotrans Ltd Class and Tongling Nonferrous Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongling Nonferrous and Sinotrans 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 Sinotrans Ltd Class are associated (or correlated) with Tongling Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongling Nonferrous has no effect on the direction of Sinotrans i.e., Sinotrans and Tongling Nonferrous go up and down completely randomly.

Pair Corralation between Sinotrans and Tongling Nonferrous

Assuming the 90 days trading horizon Sinotrans Ltd Class is expected to under-perform the Tongling Nonferrous. But the stock apears to be less risky and, when comparing its historical volatility, Sinotrans Ltd Class is 1.51 times less risky than Tongling Nonferrous. The stock trades about -0.04 of its potential returns per unit of risk. The Tongling Nonferrous Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  331.00  in Tongling Nonferrous Metals on December 28, 2024 and sell it today you would earn a total of  21.00  from holding Tongling Nonferrous Metals or generate 6.34% return on investment over 90 days.

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

Sinotrans Ltd Class  vs.  Tongling Nonferrous Metals

Sinotrans Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinotrans Ltd Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinotrans is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tongling Nonferrous

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tongling Nonferrous Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongling Nonferrous may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sinotrans and Tongling Nonferrous

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

The idea behind Sinotrans Ltd Class and Tongling Nonferrous Metals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.