Correlation Between Tanke Biosciences and New Generation

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Can any of the company-specific risk be diversified away by investing in both Tanke Biosciences and New Generation 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 Tanke Biosciences and New Generation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tanke Biosciences and New Generation Consumer, you can compare the effects of market volatilities on Tanke Biosciences and New Generation 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 Tanke Biosciences with a short position of New Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tanke Biosciences and New Generation.

Diversification Opportunities for Tanke Biosciences and New Generation

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Tanke and New is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tanke Biosciences and New Generation Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Generation Consumer and Tanke Biosciences 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 Tanke Biosciences are associated (or correlated) with New Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Generation Consumer has no effect on the direction of Tanke Biosciences i.e., Tanke Biosciences and New Generation go up and down completely randomly.

Pair Corralation between Tanke Biosciences and New Generation

Given the investment horizon of 90 days Tanke Biosciences is expected to generate 1.89 times more return on investment than New Generation. However, Tanke Biosciences is 1.89 times more volatile than New Generation Consumer. It trades about 0.05 of its potential returns per unit of risk. New Generation Consumer is currently generating about 0.03 per unit of risk. If you would invest  15.00  in Tanke Biosciences on September 3, 2024 and sell it today you would lose (14.00) from holding Tanke Biosciences or give up 93.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Tanke Biosciences  vs.  New Generation Consumer

 Performance 
       Timeline  
Tanke Biosciences 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Tanke Biosciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental drivers, Tanke Biosciences demonstrated solid returns over the last few months and may actually be approaching a breakup point.
New Generation Consumer 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in New Generation Consumer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, New Generation reported solid returns over the last few months and may actually be approaching a breakup point.

Tanke Biosciences and New Generation Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tanke Biosciences and New Generation

The main advantage of trading using opposite Tanke Biosciences and New Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tanke Biosciences position performs unexpectedly, New Generation 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 New Generation will offset losses from the drop in New Generation's long position.
The idea behind Tanke Biosciences and New Generation Consumer 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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