Correlation Between China Natural and TOMI Environmental

Can any of the company-specific risk be diversified away by investing in both China Natural 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 Natural 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 Natural Resources and TOMI Environmental Solutions, you can compare the effects of market volatilities on China Natural 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 Natural with a short position of TOMI Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Natural and TOMI Environmental.

Diversification Opportunities for China Natural and TOMI Environmental

0.17

Correlation Coefficient

China Natural  TOMI Environmental

Average diversification

The 3 months correlation between China and TOMI is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding China Natural Resources 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 Natural 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 Natural Resources 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 Natural i.e., China Natural and TOMI Environmental go up and down completely randomly.

Pair Corralation between China Natural and TOMI Environmental

Given the investment horizon of 90 days China Natural is expected to generate 1.54 times less return on investment than TOMI Environmental. In addition to that, China Natural is 1.11 times more volatile than TOMI Environmental Solutions. It trades about 0.27 of its total potential returns per unit of risk. TOMI Environmental Solutions is currently generating about 0.46 per unit of volatility. If you would invest  72.00  in TOMI Environmental Solutions on October 12, 2024 and sell it today you would earn a total of  40.00  from holding TOMI Environmental Solutions or generate 55.56% return on investment over 90 days.

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

China Natural Resources  vs.  TOMI Environmental Solutions

China Natural Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Natural Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, China Natural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TOMI Environmental

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TOMI Environmental Solutions are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, TOMI Environmental showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Natural and TOMI Environmental

The main advantage of trading using opposite China Natural and TOMI Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Natural 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 Natural Resources 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.