Correlation Between TOMI Environmental and China Natural

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

Diversification Opportunities for TOMI Environmental and China Natural

0.17

Correlation Coefficient

TOMI Environmental  China Natural

Average diversification

The 3 months correlation between TOMI and China is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding TOMI Environmental Solutions and China Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Natural Resources 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 Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Natural Resources has no effect on the direction of TOMI Environmental i.e., TOMI Environmental and China Natural go up and down completely randomly.

Pair Corralation between TOMI Environmental and China Natural

Given the investment horizon of 90 days TOMI Environmental Solutions is expected to generate 0.9 times more return on investment than China Natural. However, TOMI Environmental Solutions is 1.11 times less risky than China Natural. It trades about 0.46 of its potential returns per unit of risk. China Natural Resources is currently generating about 0.27 per unit of risk. 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

TOMI Environmental Solutions  vs.  China Natural Resources

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.

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.

Pair Trading with TOMI Environmental and China Natural

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

The idea behind TOMI Environmental Solutions and China Natural Resources 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.