Correlation Between Tanke Biosciences and AVVAA World

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

By analyzing existing cross correlation between Tanke Biosciences and AVVAA World Health, you can compare the effects of market volatilities on Tanke Biosciences and AVVAA World 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 Tanke Biosciences with a short position of AVVAA World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tanke Biosciences and AVVAA World.

Diversification Opportunities for Tanke Biosciences and AVVAA World

0.44

Correlation Coefficient

Tanke Biosciences  AVVAA World

Very weak diversification

The 3 months correlation between Tanke and AVVAA is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tanke Biosciences and AVVAA World Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVVAA World Health and Tanke Biosciences 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 Tanke Biosciences are associated (or correlated) with AVVAA World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVVAA World Health has no effect on the direction of Tanke Biosciences i.e., Tanke Biosciences and AVVAA World go up and down completely randomly.

Pair Corralation between Tanke Biosciences and AVVAA World

Given the investment horizon of 90 days Tanke Biosciences is expected to generate 1.89 times more return on investment than AVVAA World. However, Tanke Biosciences is 1.89 times more volatile than AVVAA World Health. It trades about 0.15 of its potential returns per unit of risk. AVVAA World Health is currently generating about 0.12 per unit of risk. If you would invest  2.00  in Tanke Biosciences on December 27, 2024 and sell it today you would earn a total of  1.00  from holding Tanke Biosciences or generate 50.0% return on investment over 90 days.

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

Tanke Biosciences  vs.  AVVAA World Health

Tanke Biosciences

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tanke Biosciences are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental drivers, Tanke Biosciences demonstrated solid returns over the last few months and may actually be approaching a breakup point.

AVVAA World Health

Risk-Adjusted Performance

OK

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

Pair Trading with Tanke Biosciences and AVVAA World

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

The idea behind Tanke Biosciences and AVVAA World Health 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.