Correlation Between Dalian Thermal and Tinavi Medical

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

By analyzing existing cross correlation between Dalian Thermal Power and Tinavi Medical Technologies, you can compare the effects of market volatilities on Dalian Thermal and Tinavi Medical 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 Dalian Thermal with a short position of Tinavi Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dalian Thermal and Tinavi Medical.

Diversification Opportunities for Dalian Thermal and Tinavi Medical

0.78

Correlation Coefficient

Dalian Thermal  Tinavi Medical

Poor diversification

The 3 months correlation between Dalian and Tinavi is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dalian Thermal Power and Tinavi Medical Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tinavi Medical Techn and Dalian Thermal 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 Dalian Thermal Power are associated (or correlated) with Tinavi Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tinavi Medical Techn has no effect on the direction of Dalian Thermal i.e., Dalian Thermal and Tinavi Medical go up and down completely randomly.

Pair Corralation between Dalian Thermal and Tinavi Medical

Assuming the 90 days trading horizon Dalian Thermal is expected to generate 3.1 times less return on investment than Tinavi Medical. But when comparing it to its historical volatility, Dalian Thermal Power is 1.09 times less risky than Tinavi Medical. It trades about 0.03 of its potential returns per unit of risk. Tinavi Medical Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  881.00  in Tinavi Medical Technologies on September 30, 2024 and sell it today you would earn a total of  185.00  from holding Tinavi Medical Technologies or generate 21.0% return on investment over 90 days.

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

Dalian Thermal Power  vs.  Tinavi Medical Technologies

Dalian Thermal Power

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dalian Thermal Power are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dalian Thermal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tinavi Medical Techn

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tinavi Medical Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tinavi Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dalian Thermal and Tinavi Medical

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

The idea behind Dalian Thermal Power and Tinavi Medical Technologies 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.