Correlation Between Volcon and China Tower

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

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

Diversification Opportunities for Volcon and China Tower

-0.32

Correlation Coefficient

Volcon  China Tower

Very good diversification

The 3 months correlation between Volcon and China is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Volcon Inc and China Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Tower and Volcon 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 Volcon Inc are associated (or correlated) with China Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Tower has no effect on the direction of Volcon i.e., Volcon and China Tower go up and down completely randomly.

Pair Corralation between Volcon and China Tower

Given the investment horizon of 90 days Volcon is expected to generate 2.62 times less return on investment than China Tower. In addition to that, Volcon is 1.28 times more volatile than China Tower. It trades about 0.07 of its total potential returns per unit of risk. China Tower is currently generating about 0.24 per unit of volatility. If you would invest  12.00  in China Tower on October 5, 2024 and sell it today you would earn a total of  2.00  from holding China Tower or generate 16.67% return on investment over 90 days.

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

Volcon Inc  vs.  China Tower

Volcon Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volcon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

China Tower

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Tower are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Tower is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Volcon and China Tower

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

The idea behind Volcon Inc and China Tower 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.