Correlation Between Western Metal and Tianjin Yiyi

Can any of the company-specific risk be diversified away by investing in both Western Metal and Tianjin Yiyi 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 Western Metal and Tianjin Yiyi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Metal Materials and Tianjin Yiyi Hygiene, you can compare the effects of market volatilities on Western Metal and Tianjin Yiyi 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 Western Metal with a short position of Tianjin Yiyi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Metal and Tianjin Yiyi.

Diversification Opportunities for Western Metal and Tianjin Yiyi

0.43

Correlation Coefficient

Western Metal  Tianjin Yiyi

Very weak diversification

The 3 months correlation between Western and Tianjin is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Western Metal Materials and Tianjin Yiyi Hygiene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Yiyi Hygiene and Western Metal 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 Western Metal Materials are associated (or correlated) with Tianjin Yiyi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Yiyi Hygiene has no effect on the direction of Western Metal i.e., Western Metal and Tianjin Yiyi go up and down completely randomly.

Pair Corralation between Western Metal and Tianjin Yiyi

Assuming the 90 days trading horizon Western Metal is expected to generate 1.76 times less return on investment than Tianjin Yiyi. But when comparing it to its historical volatility, Western Metal Materials is 1.0 times less risky than Tianjin Yiyi. It trades about 0.02 of its potential returns per unit of risk. Tianjin Yiyi Hygiene is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,659  in Tianjin Yiyi Hygiene on October 26, 2024 and sell it today you would earn a total of  443.00  from holding Tianjin Yiyi Hygiene or generate 26.7% return on investment over 90 days.

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

Western Metal Materials  vs.  Tianjin Yiyi Hygiene

Western Metal Materials

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Metal Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Western Metal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tianjin Yiyi Hygiene

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Yiyi Hygiene are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Yiyi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Metal and Tianjin Yiyi

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

The idea behind Western Metal Materials and Tianjin Yiyi Hygiene 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..