Correlation Between Timbercreek Financial and CNFinance Holdings

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

By analyzing existing cross correlation between Timbercreek Financial Corp and CNFinance Holdings, you can compare the effects of market volatilities on Timbercreek Financial and CNFinance Holdings 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 Timbercreek Financial with a short position of CNFinance Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timbercreek Financial and CNFinance Holdings.

Diversification Opportunities for Timbercreek Financial and CNFinance Holdings

0.4

Correlation Coefficient

Timbercreek Financial  CNFinance Holdings

Very weak diversification

The 3 months correlation between Timbercreek and CNFinance is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Timbercreek Financial Corp and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance Holdings and Timbercreek Financial 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 Timbercreek Financial Corp are associated (or correlated) with CNFinance Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNFinance Holdings has no effect on the direction of Timbercreek Financial i.e., Timbercreek Financial and CNFinance Holdings go up and down completely randomly.

Pair Corralation between Timbercreek Financial and CNFinance Holdings

Assuming the 90 days horizon Timbercreek Financial Corp is expected to under-perform the CNFinance Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Timbercreek Financial Corp is 3.99 times less risky than CNFinance Holdings. The pink sheet trades about 0.0 of its potential returns per unit of risk. The CNFinance Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  100.00  in CNFinance Holdings on August 31, 2024 and sell it today you would lose (5.00) from holding CNFinance Holdings or give up 5.0% of portfolio value over 90 days.

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

Timbercreek Financial Corp  vs.  CNFinance Holdings

Timbercreek Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timbercreek Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Timbercreek Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

CNFinance Holdings

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNFinance Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, CNFinance Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Timbercreek Financial and CNFinance Holdings

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

The idea behind Timbercreek Financial Corp and CNFinance Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.