Correlation Between China Automotive and Tennant
Can any of the company-specific risk be diversified away by investing in both China Automotive and Tennant 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 Automotive and Tennant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Automotive Systems and Tennant Company, you can compare the effects of market volatilities on China Automotive and Tennant 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 Automotive with a short position of Tennant. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Automotive and Tennant.
Diversification Opportunities for China Automotive and Tennant
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Tennant is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding China Automotive Systems and Tennant Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tennant Company and China Automotive 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 Automotive Systems are associated (or correlated) with Tennant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tennant Company has no effect on the direction of China Automotive i.e., China Automotive and Tennant go up and down completely randomly.
Pair Corralation between China Automotive and Tennant
Given the investment horizon of 90 days China Automotive Systems is expected to generate 1.78 times more return on investment than Tennant. However, China Automotive is 1.78 times more volatile than Tennant Company. It trades about 0.1 of its potential returns per unit of risk. Tennant Company is currently generating about -0.05 per unit of risk. If you would invest 272.00 in China Automotive Systems on September 1, 2024 and sell it today you would earn a total of 172.00 from holding China Automotive Systems or generate 63.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Automotive Systems vs. Tennant Company
Performance |
| Timeline |
| China Automotive Systems |
| Tennant Company |
China Automotive and Tennant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Automotive and Tennant
The main advantage of trading using opposite China Automotive and Tennant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Automotive position performs unexpectedly, Tennant 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 Tennant will offset losses from the drop in Tennant's long position.| China Automotive vs. Dorman Products | China Automotive vs. Monro Muffler Brake | China Automotive vs. Standard Motor Products | China Automotive vs. Stoneridge |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |