Correlation Between China Tontine and Alliance Recovery

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

By analyzing existing cross correlation between China Tontine Wines and Alliance Recovery, you can compare the effects of market volatilities on China Tontine and Alliance Recovery 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 China Tontine with a short position of Alliance Recovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Tontine and Alliance Recovery.

Diversification Opportunities for China Tontine and Alliance Recovery

0.0

Correlation Coefficient

China Tontine  Alliance Recovery

Pay attention - limited upside

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

Pair Corralation between China Tontine and Alliance Recovery

If you would invest  0.21  in Alliance Recovery on December 20, 2024 and sell it today you would earn a total of  0.06  from holding Alliance Recovery or generate 28.57% return on investment over 90 days.

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

China Tontine Wines  vs.  Alliance Recovery

China Tontine Wines

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Tontine Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Tontine is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Alliance Recovery

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Recovery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Alliance Recovery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Tontine and Alliance Recovery

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

The idea behind China Tontine Wines and Alliance Recovery 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.