Correlation Between Tianjin Jingwei and Sublime China

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

By analyzing existing cross correlation between Tianjin Jingwei Electric and Sublime China Information, you can compare the effects of market volatilities on Tianjin Jingwei and Sublime China 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 Tianjin Jingwei with a short position of Sublime China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Jingwei and Sublime China.

Diversification Opportunities for Tianjin Jingwei and Sublime China

-0.11

Correlation Coefficient

Tianjin Jingwei  Sublime China

Good diversification

The 3 months correlation between Tianjin and Sublime is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Jingwei Electric and Sublime China Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sublime China Information and Tianjin Jingwei 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 Tianjin Jingwei Electric are associated (or correlated) with Sublime China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sublime China Information has no effect on the direction of Tianjin Jingwei i.e., Tianjin Jingwei and Sublime China go up and down completely randomly.

Pair Corralation between Tianjin Jingwei and Sublime China

Assuming the 90 days trading horizon Tianjin Jingwei Electric is expected to generate 1.02 times more return on investment than Sublime China. However, Tianjin Jingwei is 1.02 times more volatile than Sublime China Information. It trades about 0.04 of its potential returns per unit of risk. Sublime China Information is currently generating about 0.03 per unit of risk. If you would invest  647.00  in Tianjin Jingwei Electric on October 10, 2024 and sell it today you would earn a total of  230.00  from holding Tianjin Jingwei Electric or generate 35.55% return on investment over 90 days.

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

Tianjin Jingwei Electric  vs.  Sublime China Information

Tianjin Jingwei Electric

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Jingwei Electric are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Jingwei sustained solid returns over the last few months and may actually be approaching a breakup point.

Sublime China Information

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sublime China Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sublime China may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tianjin Jingwei and Sublime China

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

The idea behind Tianjin Jingwei Electric and Sublime China Information 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.