Correlation Between Timken and China Clean

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

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

Diversification Opportunities for Timken and China Clean

0.0

Correlation Coefficient

Timken  China Clean

Pay attention - limited upside

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

Pair Corralation between Timken and China Clean

If you would invest  7,672  in Timken Company on October 9, 2024 and sell it today you would lose (299.00) from holding Timken Company or give up 3.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Timken Company  vs.  China Clean Energy

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

China Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, China Clean is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Timken and China Clean

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

The idea behind Timken Company and China Clean Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.