Correlation Between China De and TransAtlantic Capital

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

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

Diversification Opportunities for China De and TransAtlantic Capital

0.13

Correlation Coefficient

China De  TransAtlantic Capital

Average diversification

The 3 months correlation between China and TransAtlantic is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding China De Xiao and TransAtlantic Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAtlantic Capital and China De 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 De Xiao are associated (or correlated) with TransAtlantic Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAtlantic Capital has no effect on the direction of China De i.e., China De and TransAtlantic Capital go up and down completely randomly.

Pair Corralation between China De and TransAtlantic Capital

Given the investment horizon of 90 days China De Xiao is expected to under-perform the TransAtlantic Capital. But the pink sheet apears to be less risky and, when comparing its historical volatility, China De Xiao is 20.08 times less risky than TransAtlantic Capital. The pink sheet trades about -0.13 of its potential returns per unit of risk. The TransAtlantic Capital is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.01  in TransAtlantic Capital on October 10, 2024 and sell it today you would earn a total of  0.00  from holding TransAtlantic Capital or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

China De Xiao  vs.  TransAtlantic Capital

China De Xiao

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China De Xiao has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

TransAtlantic Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TransAtlantic Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental indicators, TransAtlantic Capital demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China De and TransAtlantic Capital

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

The idea behind China De Xiao and TransAtlantic Capital 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 Transaction History module to view history of all your transactions and understand their impact on performance.