Correlation Between JCHX Mining and Tongxing Environmental

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

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

Diversification Opportunities for JCHX Mining and Tongxing Environmental

-0.3

Correlation Coefficient

JCHX Mining  Tongxing Environmental

Very good diversification

The 3 months correlation between JCHX and Tongxing is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding JCHX Mining Management and Tongxing Environmental Protect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongxing Environmental and JCHX Mining 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 JCHX Mining Management are associated (or correlated) with Tongxing Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongxing Environmental has no effect on the direction of JCHX Mining i.e., JCHX Mining and Tongxing Environmental go up and down completely randomly.

Pair Corralation between JCHX Mining and Tongxing Environmental

Assuming the 90 days trading horizon JCHX Mining Management is expected to under-perform the Tongxing Environmental. But the stock apears to be less risky and, when comparing its historical volatility, JCHX Mining Management is 1.41 times less risky than Tongxing Environmental. The stock trades about -0.12 of its potential returns per unit of risk. The Tongxing Environmental Protection is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,246  in Tongxing Environmental Protection on September 26, 2024 and sell it today you would earn a total of  244.00  from holding Tongxing Environmental Protection or generate 19.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

JCHX Mining Management  vs.  Tongxing Environmental Protect

JCHX Mining Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JCHX Mining Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tongxing Environmental

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tongxing Environmental Protection are ranked lower than 7 (%) 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.

Pair Trading with JCHX Mining and Tongxing Environmental

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

The idea behind JCHX Mining Management and Tongxing Environmental Protection 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.