Correlation Between China Conch and TOMI Environmental

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

By analyzing existing cross correlation between China Conch Venture and TOMI Environmental Solutions, you can compare the effects of market volatilities on China Conch and TOMI Environmental 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 Conch with a short position of TOMI Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Conch and TOMI Environmental.

Diversification Opportunities for China Conch and TOMI Environmental

0.23

Correlation Coefficient

China Conch  TOMI Environmental

Modest diversification

The 3 months correlation between China and TOMI is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding China Conch Venture and TOMI Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOMI Environmental and China Conch 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 Conch Venture are associated (or correlated) with TOMI Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOMI Environmental has no effect on the direction of China Conch i.e., China Conch and TOMI Environmental go up and down completely randomly.

Pair Corralation between China Conch and TOMI Environmental

Assuming the 90 days horizon China Conch Venture is expected to generate 0.49 times more return on investment than TOMI Environmental. However, China Conch Venture is 2.02 times less risky than TOMI Environmental. It trades about 0.1 of its potential returns per unit of risk. TOMI Environmental Solutions is currently generating about 0.03 per unit of risk. If you would invest  49.00  in China Conch Venture on October 3, 2024 and sell it today you would earn a total of  44.00  from holding China Conch Venture or generate 89.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.63%
Values	Daily Returns

China Conch Venture  vs.  TOMI Environmental Solutions

China Conch Venture

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Conch Venture are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Conch reported solid returns over the last few months and may actually be approaching a breakup point.

TOMI Environmental

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TOMI Environmental Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, TOMI Environmental showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Conch and TOMI Environmental

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

The idea behind China Conch Venture and TOMI Environmental Solutions 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.