Correlation Between Tianjin Pengling and Jiugui Liquor

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

By analyzing existing cross correlation between Tianjin Pengling Rubber and Jiugui Liquor Co, you can compare the effects of market volatilities on Tianjin Pengling and Jiugui Liquor 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 Pengling with a short position of Jiugui Liquor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Pengling and Jiugui Liquor.

Diversification Opportunities for Tianjin Pengling and Jiugui Liquor

0.91

Correlation Coefficient

Tianjin Pengling  Jiugui Liquor

Almost no diversification

The 3 months correlation between Tianjin and Jiugui is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Pengling Rubber and Jiugui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiugui Liquor and Tianjin Pengling 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 Pengling Rubber are associated (or correlated) with Jiugui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiugui Liquor has no effect on the direction of Tianjin Pengling i.e., Tianjin Pengling and Jiugui Liquor go up and down completely randomly.

Pair Corralation between Tianjin Pengling and Jiugui Liquor

Assuming the 90 days trading horizon Tianjin Pengling is expected to generate 1.7 times less return on investment than Jiugui Liquor. In addition to that, Tianjin Pengling is 1.03 times more volatile than Jiugui Liquor Co. It trades about 0.08 of its total potential returns per unit of risk. Jiugui Liquor Co is currently generating about 0.14 per unit of volatility. If you would invest  4,272  in Jiugui Liquor Co on September 26, 2024 and sell it today you would earn a total of  1,367  from holding Jiugui Liquor Co or generate 32.0% return on investment over 90 days.

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

Tianjin Pengling Rubber  vs.  Jiugui Liquor Co

Tianjin Pengling Rubber

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Pengling Rubber are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Pengling sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiugui Liquor

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Tianjin Pengling and Jiugui Liquor

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

The idea behind Tianjin Pengling Rubber and Jiugui Liquor Co 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.