Correlation Between TOMI Environmental and China Conch

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

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

Diversification Opportunities for TOMI Environmental and China Conch

0.08

Correlation Coefficient

TOMI Environmental  China Conch

Significant diversification

The 3 months correlation between TOMI and China is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding TOMI Environmental Solutions and China Conch Venture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Conch Venture and TOMI Environmental 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 TOMI Environmental Solutions are associated (or correlated) with China Conch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Conch Venture has no effect on the direction of TOMI Environmental i.e., TOMI Environmental and China Conch go up and down completely randomly.

Pair Corralation between TOMI Environmental and China Conch

Given the investment horizon of 90 days TOMI Environmental Solutions is expected to generate 1.51 times more return on investment than China Conch. However, TOMI Environmental is 1.51 times more volatile than China Conch Venture. It trades about 0.12 of its potential returns per unit of risk. China Conch Venture is currently generating about 0.19 per unit of risk. If you would invest  79.00  in TOMI Environmental Solutions on September 29, 2024 and sell it today you would earn a total of  26.00  from holding TOMI Environmental Solutions or generate 32.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

TOMI Environmental Solutions  vs.  China Conch Venture

TOMI Environmental

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TOMI Environmental Solutions are ranked lower than 9 (%) 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.

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.

Pair Trading with TOMI Environmental and China Conch

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

The idea behind TOMI Environmental Solutions and China Conch Venture 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.