Correlation Between Tongxing Environmental and China International

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

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

Diversification Opportunities for Tongxing Environmental and China International

0.69

Correlation Coefficient

Tongxing Environmental  China International

Poor diversification

The 3 months correlation between Tongxing and China is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tongxing Environmental Protect and China International Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China International and Tongxing 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 Tongxing Environmental Protection are associated (or correlated) with China International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China International has no effect on the direction of Tongxing Environmental i.e., Tongxing Environmental and China International go up and down completely randomly.

Pair Corralation between Tongxing Environmental and China International

Assuming the 90 days trading horizon Tongxing Environmental Protection is expected to generate 0.92 times more return on investment than China International. However, Tongxing Environmental Protection is 1.08 times less risky than China International. It trades about 0.16 of its potential returns per unit of risk. China International Capital is currently generating about 0.14 per unit of risk. If you would invest  1,219  in Tongxing Environmental Protection on September 4, 2024 and sell it today you would earn a total of  405.00  from holding Tongxing Environmental Protection or generate 33.22% return on investment over 90 days.

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

Tongxing Environmental Protect  vs.  China International Capital

Tongxing Environmental

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tongxing Environmental Protection are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongxing Environmental sustained solid returns over the last few months and may actually be approaching a breakup point.

China International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China International Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tongxing Environmental and China International

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

The idea behind Tongxing Environmental Protection and China International Capital 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.