Correlation Between China Gold and TC Energy

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

By analyzing existing cross correlation between China Gold International and TC Energy Corp, you can compare the effects of market volatilities on China Gold and TC Energy 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 China Gold with a short position of TC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Gold and TC Energy.

Diversification Opportunities for China Gold and TC Energy

0.72

Correlation Coefficient

China Gold  TC Energy

Poor diversification

The 3 months correlation between China and TRP-PF is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding China Gold International and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp and China Gold 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 China Gold International are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of China Gold i.e., China Gold and TC Energy go up and down completely randomly.

Pair Corralation between China Gold and TC Energy

Assuming the 90 days trading horizon China Gold International is expected to generate 3.55 times more return on investment than TC Energy. However, China Gold is 3.55 times more volatile than TC Energy Corp. It trades about 0.05 of its potential returns per unit of risk. TC Energy Corp is currently generating about 0.09 per unit of risk. If you would invest  392.00  in China Gold International on September 25, 2024 and sell it today you would earn a total of  302.00  from holding China Gold International or generate 77.04% return on investment over 90 days.

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

China Gold International  vs.  TC Energy Corp

China Gold International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Gold International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, China Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

TC Energy Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TC Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Gold and TC Energy

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

The idea behind China Gold International and TC Energy Corp 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.