Correlation Between Tacheng Real and Wonderful

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

By analyzing existing cross correlation between Tacheng Real Estate and Wonderful Hi Tech Co, you can compare the effects of market volatilities on Tacheng Real and Wonderful 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 Tacheng Real with a short position of Wonderful. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tacheng Real and Wonderful.

Diversification Opportunities for Tacheng Real and Wonderful

-0.32

Correlation Coefficient

Tacheng Real  Wonderful

Very good diversification

The 3 months correlation between Tacheng and Wonderful is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tacheng Real Estate and Wonderful Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonderful Hi Tech and Tacheng Real 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 Tacheng Real Estate are associated (or correlated) with Wonderful. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonderful Hi Tech has no effect on the direction of Tacheng Real i.e., Tacheng Real and Wonderful go up and down completely randomly.

Pair Corralation between Tacheng Real and Wonderful

Assuming the 90 days trading horizon Tacheng Real Estate is expected to generate 0.73 times more return on investment than Wonderful. However, Tacheng Real Estate is 1.37 times less risky than Wonderful. It trades about 0.11 of its potential returns per unit of risk. Wonderful Hi Tech Co is currently generating about -0.06 per unit of risk. If you would invest  3,795  in Tacheng Real Estate on September 21, 2024 and sell it today you would earn a total of  305.00  from holding Tacheng Real Estate or generate 8.04% return on investment over 90 days.

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

Tacheng Real Estate  vs.  Wonderful Hi Tech Co

Tacheng Real Estate

Risk-Adjusted Performance

6 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tacheng Real Estate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tacheng Real showed solid returns over the last few months and may actually be approaching a breakup point.

Wonderful Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wonderful Hi Tech Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Tacheng Real and Wonderful

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

The idea behind Tacheng Real Estate and Wonderful Hi Tech Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.