Correlation Between Nan Liu and TCI

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

By analyzing existing cross correlation between Nan Liu Enterprise and TCI Co, you can compare the effects of market volatilities on Nan Liu and TCI 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 Nan Liu with a short position of TCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Liu and TCI.

Diversification Opportunities for Nan Liu and TCI

0.71

Correlation Coefficient

Nan Liu  TCI

Poor diversification

The 3 months correlation between Nan and TCI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Nan Liu Enterprise and TCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCI Co and Nan Liu 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 Nan Liu Enterprise are associated (or correlated) with TCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCI Co has no effect on the direction of Nan Liu i.e., Nan Liu and TCI go up and down completely randomly.

Pair Corralation between Nan Liu and TCI

Assuming the 90 days trading horizon Nan Liu Enterprise is expected to generate 1.15 times more return on investment than TCI. However, Nan Liu is 1.15 times more volatile than TCI Co. It trades about -0.01 of its potential returns per unit of risk. TCI Co is currently generating about -0.09 per unit of risk. If you would invest  7,110  in Nan Liu Enterprise on September 27, 2024 and sell it today you would lose (140.00) from holding Nan Liu Enterprise or give up 1.97% of portfolio value over 90 days.

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

Nan Liu Enterprise  vs.  TCI Co

Nan Liu Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nan Liu Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nan Liu is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

TCI Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TCI Co 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.

Pair Trading with Nan Liu and TCI

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

The idea behind Nan Liu Enterprise and TCI Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.