Correlation Between Ta Ya and China Electric

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

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

Diversification Opportunities for Ta Ya and China Electric

0.59

Correlation Coefficient

Ta Ya  China Electric

Very weak diversification

The 3 months correlation between 1609 and China is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ta Ya Electric and China Electric Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Electric Manuf and Ta Ya 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 Ta Ya Electric are associated (or correlated) with China Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Electric Manuf has no effect on the direction of Ta Ya i.e., Ta Ya and China Electric go up and down completely randomly.

Pair Corralation between Ta Ya and China Electric

Assuming the 90 days trading horizon Ta Ya Electric is expected to under-perform the China Electric. But the stock apears to be less risky and, when comparing its historical volatility, Ta Ya Electric is 1.14 times less risky than China Electric. The stock trades about -0.08 of its potential returns per unit of risk. The China Electric Manufacturing is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,680  in China Electric Manufacturing on September 4, 2024 and sell it today you would earn a total of  30.00  from holding China Electric Manufacturing or generate 1.79% return on investment over 90 days.

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

Ta Ya Electric  vs.  China Electric Manufacturing

Ta Ya Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ta Ya Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

China Electric Manuf

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Electric Manufacturing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Electric is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ta Ya and China Electric

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

The idea behind Ta Ya Electric and China Electric Manufacturing 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.