Correlation Between Information Technology and Ten Ren

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

By analyzing existing cross correlation between Information Technology Total and Ten Ren Tea, you can compare the effects of market volatilities on Information Technology and Ten Ren 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 Information Technology with a short position of Ten Ren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and Ten Ren.

Diversification Opportunities for Information Technology and Ten Ren

0.17

Correlation Coefficient

Information Technology  Ten Ren

Average diversification

The 3 months correlation between Information and Ten is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and Ten Ren Tea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ten Ren Tea and Information Technology 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 Information Technology Total are associated (or correlated) with Ten Ren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ten Ren Tea has no effect on the direction of Information Technology i.e., Information Technology and Ten Ren go up and down completely randomly.

Pair Corralation between Information Technology and Ten Ren

Assuming the 90 days trading horizon Information Technology is expected to generate 1.14 times less return on investment than Ten Ren. In addition to that, Information Technology is 2.85 times more volatile than Ten Ren Tea. It trades about 0.07 of its total potential returns per unit of risk. Ten Ren Tea is currently generating about 0.21 per unit of volatility. If you would invest  3,025  in Ten Ren Tea on December 23, 2024 and sell it today you would earn a total of  340.00  from holding Ten Ren Tea or generate 11.24% return on investment over 90 days.

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

Information Technology Total  vs.  Ten Ren Tea

Information Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ten Ren Tea

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ten Ren Tea are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ten Ren may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Information Technology and Ten Ren

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

The idea behind Information Technology Total and Ten Ren Tea 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.