Correlation Between Tibet Huayu and Shenzhen Silver

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

By analyzing existing cross correlation between Tibet Huayu Mining and Shenzhen Silver Basis, you can compare the effects of market volatilities on Tibet Huayu and Shenzhen Silver 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 Tibet Huayu with a short position of Shenzhen Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tibet Huayu and Shenzhen Silver.

Diversification Opportunities for Tibet Huayu and Shenzhen Silver

0.75

Correlation Coefficient

Tibet Huayu  Shenzhen Silver

Poor diversification

The 3 months correlation between Tibet and Shenzhen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining and Shenzhen Silver Basis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Silver Basis and Tibet Huayu 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 Tibet Huayu Mining are associated (or correlated) with Shenzhen Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Silver Basis has no effect on the direction of Tibet Huayu i.e., Tibet Huayu and Shenzhen Silver go up and down completely randomly.

Pair Corralation between Tibet Huayu and Shenzhen Silver

Assuming the 90 days trading horizon Tibet Huayu Mining is expected to generate 0.8 times more return on investment than Shenzhen Silver. However, Tibet Huayu Mining is 1.25 times less risky than Shenzhen Silver. It trades about 0.19 of its potential returns per unit of risk. Shenzhen Silver Basis is currently generating about 0.15 per unit of risk. If you would invest  1,025  in Tibet Huayu Mining on September 14, 2024 and sell it today you would earn a total of  473.00  from holding Tibet Huayu Mining or generate 46.15% return on investment over 90 days.

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

Tibet Huayu Mining  vs.  Shenzhen Silver Basis

Tibet Huayu Mining

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Silver Basis

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Tibet Huayu and Shenzhen Silver

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

The idea behind Tibet Huayu Mining and Shenzhen Silver Basis 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..