Correlation Between Tree Island and Wetouch Technology

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

By analyzing existing cross correlation between Tree Island Steel and Wetouch Technology Common, you can compare the effects of market volatilities on Tree Island and Wetouch Technology 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 Tree Island with a short position of Wetouch Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tree Island and Wetouch Technology.

Diversification Opportunities for Tree Island and Wetouch Technology

0.52

Correlation Coefficient

Tree Island  Wetouch Technology

Very weak diversification

The 3 months correlation between Tree and Wetouch is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Tree Island Steel and Wetouch Technology Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wetouch Technology Common and Tree Island 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 Tree Island Steel are associated (or correlated) with Wetouch Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wetouch Technology Common has no effect on the direction of Tree Island i.e., Tree Island and Wetouch Technology go up and down completely randomly.

Pair Corralation between Tree Island and Wetouch Technology

Assuming the 90 days horizon Tree Island Steel is expected to under-perform the Wetouch Technology. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tree Island Steel is 2.21 times less risky than Wetouch Technology. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Wetouch Technology Common is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  163.00  in Wetouch Technology Common on December 29, 2024 and sell it today you would lose (17.00) from holding Wetouch Technology Common or give up 10.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Tree Island Steel  vs.  Wetouch Technology Common

Tree Island Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tree Island Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Wetouch Technology Common

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wetouch Technology Common has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Wetouch Technology is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Tree Island and Wetouch Technology

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

The idea behind Tree Island Steel and Wetouch Technology Common 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.