Correlation Between New Generation and Tanke Biosciences
Can any of the company-specific risk be diversified away by investing in both New Generation and Tanke Biosciences 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 New Generation and Tanke Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Generation Consumer and Tanke Biosciences, you can compare the effects of market volatilities on New Generation and Tanke Biosciences 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 New Generation with a short position of Tanke Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Generation and Tanke Biosciences.
Diversification Opportunities for New Generation and Tanke Biosciences
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Tanke is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding New Generation Consumer and Tanke Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanke Biosciences and New Generation 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 New Generation Consumer are associated (or correlated) with Tanke Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanke Biosciences has no effect on the direction of New Generation i.e., New Generation and Tanke Biosciences go up and down completely randomly.
Pair Corralation between New Generation and Tanke Biosciences
Given the investment horizon of 90 days New Generation Consumer is expected to under-perform the Tanke Biosciences. In addition to that, New Generation is 2.9 times more volatile than Tanke Biosciences. It trades about -0.09 of its total potential returns per unit of risk. Tanke Biosciences is currently generating about -0.21 per unit of volatility. If you would invest 1.00 in Tanke Biosciences on September 1, 2024 and sell it today you would lose (0.24) from holding Tanke Biosciences or give up 24.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
New Generation Consumer vs. Tanke Biosciences
Performance |
| Timeline |
| New Generation Consumer |
| Tanke Biosciences |
New Generation and Tanke Biosciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Generation and Tanke Biosciences
The main advantage of trading using opposite New Generation and Tanke Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Generation position performs unexpectedly, Tanke Biosciences 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 Tanke Biosciences will offset losses from the drop in Tanke Biosciences' long position.| New Generation vs. Xtra Energy Corp | New Generation vs. Arsenal Digital Holdings | New Generation vs. UHF Logistics Group | New Generation vs. XCana Petroleum |
| Tanke Biosciences vs. C2E Energy | Tanke Biosciences vs. Supurva Healthcare Group | Tanke Biosciences vs. Kasten Inc | Tanke Biosciences vs. CTR Investments Consulting |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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