Correlation Between Changshu Tongrun and Huasi Agricultural

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

By analyzing existing cross correlation between Changshu Tongrun Auto and Huasi Agricultural Development, you can compare the effects of market volatilities on Changshu Tongrun and Huasi Agricultural 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 Changshu Tongrun with a short position of Huasi Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changshu Tongrun and Huasi Agricultural.

Diversification Opportunities for Changshu Tongrun and Huasi Agricultural

0.0

Correlation Coefficient

Changshu Tongrun  Huasi Agricultural

Pay attention - limited upside

The 3 months correlation between Changshu and Huasi is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Changshu Tongrun Auto and Huasi Agricultural Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huasi Agricultural and Changshu Tongrun 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 Changshu Tongrun Auto are associated (or correlated) with Huasi Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huasi Agricultural has no effect on the direction of Changshu Tongrun i.e., Changshu Tongrun and Huasi Agricultural go up and down completely randomly.

Pair Corralation between Changshu Tongrun and Huasi Agricultural

If you would invest  353.00  in Huasi Agricultural Development on November 19, 2024 and sell it today you would earn a total of  75.00  from holding Huasi Agricultural Development or generate 21.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.28%
Values	Daily Returns

Changshu Tongrun Auto  vs.  Huasi Agricultural Development

Changshu Tongrun Auto

Risk-Adjusted Performance

Very Weak

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

Huasi Agricultural

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huasi Agricultural Development are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huasi Agricultural may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Changshu Tongrun and Huasi Agricultural

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

The idea behind Changshu Tongrun Auto and Huasi Agricultural Development 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.