Correlation Between Xinjiang Beixin and Tianjin Realty

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

By analyzing existing cross correlation between Xinjiang Beixin RoadBridge and Tianjin Realty Development, you can compare the effects of market volatilities on Xinjiang Beixin and Tianjin Realty 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 Xinjiang Beixin with a short position of Tianjin Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xinjiang Beixin and Tianjin Realty.

Diversification Opportunities for Xinjiang Beixin and Tianjin Realty

0.67

Correlation Coefficient

Xinjiang Beixin  Tianjin Realty

Poor diversification

The 3 months correlation between Xinjiang and Tianjin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Xinjiang Beixin RoadBridge and Tianjin Realty Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Realty Devel and Xinjiang Beixin 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 Xinjiang Beixin RoadBridge are associated (or correlated) with Tianjin Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Realty Devel has no effect on the direction of Xinjiang Beixin i.e., Xinjiang Beixin and Tianjin Realty go up and down completely randomly.

Pair Corralation between Xinjiang Beixin and Tianjin Realty

Assuming the 90 days trading horizon Xinjiang Beixin RoadBridge is expected to under-perform the Tianjin Realty. But the stock apears to be less risky and, when comparing its historical volatility, Xinjiang Beixin RoadBridge is 1.4 times less risky than Tianjin Realty. The stock trades about -0.01 of its potential returns per unit of risk. The Tianjin Realty Development is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  216.00  in Tianjin Realty Development on October 9, 2024 and sell it today you would earn a total of  22.00  from holding Tianjin Realty Development or generate 10.19% return on investment over 90 days.

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

Xinjiang Beixin RoadBridge  vs.  Tianjin Realty Development

Xinjiang Beixin Road

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Beixin RoadBridge are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Beixin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tianjin Realty Devel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Realty Development are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Realty sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xinjiang Beixin and Tianjin Realty

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

The idea behind Xinjiang Beixin RoadBridge and Tianjin Realty Development 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.