Correlation Between Changchun BCHT and Tibet Huayu

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

By analyzing existing cross correlation between Changchun BCHT Biotechnology and Tibet Huayu Mining, you can compare the effects of market volatilities on Changchun BCHT and Tibet Huayu 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 Changchun BCHT with a short position of Tibet Huayu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun BCHT and Tibet Huayu.

Diversification Opportunities for Changchun BCHT and Tibet Huayu

0.49

Correlation Coefficient

Changchun BCHT  Tibet Huayu

Very weak diversification

The 3 months correlation between Changchun and Tibet is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Changchun BCHT Biotechnology and Tibet Huayu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tibet Huayu Mining and Changchun BCHT 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 Changchun BCHT Biotechnology are associated (or correlated) with Tibet Huayu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tibet Huayu Mining has no effect on the direction of Changchun BCHT i.e., Changchun BCHT and Tibet Huayu go up and down completely randomly.

Pair Corralation between Changchun BCHT and Tibet Huayu

Assuming the 90 days trading horizon Changchun BCHT Biotechnology is expected to under-perform the Tibet Huayu. But the stock apears to be less risky and, when comparing its historical volatility, Changchun BCHT Biotechnology is 1.04 times less risky than Tibet Huayu. The stock trades about -0.3 of its potential returns per unit of risk. The Tibet Huayu Mining is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,328  in Tibet Huayu Mining on October 24, 2024 and sell it today you would lose (65.00) from holding Tibet Huayu Mining or give up 4.89% of portfolio value over 90 days.

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

Changchun BCHT Biotechnology  vs.  Tibet Huayu Mining

Changchun BCHT Biote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changchun BCHT Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tibet Huayu Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Changchun BCHT and Tibet Huayu

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

The idea behind Changchun BCHT Biotechnology and Tibet Huayu Mining 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.