Correlation Between Tenet Fintech and CNFinance Holdings

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

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

Diversification Opportunities for Tenet Fintech and CNFinance Holdings

0.73

Correlation Coefficient

Tenet Fintech  CNFinance Holdings

Poor diversification

The 3 months correlation between Tenet and CNFinance is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Tenet Fintech Group and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance Holdings and Tenet Fintech 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 Tenet Fintech Group 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 Tenet Fintech i.e., Tenet Fintech and CNFinance Holdings go up and down completely randomly.

Pair Corralation between Tenet Fintech and CNFinance Holdings

Assuming the 90 days horizon Tenet Fintech Group is expected to generate 3.03 times more return on investment than CNFinance Holdings. However, Tenet Fintech is 3.03 times more volatile than CNFinance Holdings. It trades about -0.01 of its potential returns per unit of risk. CNFinance Holdings is currently generating about -0.26 per unit of risk. If you would invest  8.00  in Tenet Fintech Group on January 26, 2024 and sell it today you would lose (0.57) from holding Tenet Fintech Group or give up 7.12% of portfolio value over 90 days.

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

Tenet Fintech Group  vs.  CNFinance Holdings

Tenet Fintech Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tenet Fintech Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CNFinance Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNFinance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tenet Fintech and CNFinance Holdings

The main advantage of trading using opposite Tenet Fintech and CNFinance Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tenet Fintech 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 Tenet Fintech Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.