Correlation Between Tianjin Pengling and Anyang Iron

Can any of the company-specific risk be diversified away by investing in both Tianjin Pengling and Anyang Iron 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 Anyang Iron 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 Anyang Iron Steel, you can compare the effects of market volatilities on Tianjin Pengling and Anyang Iron 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 Anyang Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Pengling and Anyang Iron.

Diversification Opportunities for Tianjin Pengling and Anyang Iron

0.68

Correlation Coefficient

Tianjin Pengling  Anyang Iron

Poor diversification

The 3 months correlation between Tianjin and Anyang is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Pengling Rubber and Anyang Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anyang Iron Steel 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 Anyang Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anyang Iron Steel has no effect on the direction of Tianjin Pengling i.e., Tianjin Pengling and Anyang Iron go up and down completely randomly.

Pair Corralation between Tianjin Pengling and Anyang Iron

Assuming the 90 days trading horizon Tianjin Pengling Rubber is expected to under-perform the Anyang Iron. But the stock apears to be less risky and, when comparing its historical volatility, Tianjin Pengling Rubber is 1.43 times less risky than Anyang Iron. The stock trades about -0.03 of its potential returns per unit of risk. The Anyang Iron Steel is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  196.00  in Anyang Iron Steel on December 4, 2024 and sell it today you would lose (5.00) from holding Anyang Iron Steel or give up 2.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Tianjin Pengling Rubber  vs.  Anyang Iron Steel

Tianjin Pengling Rubber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tianjin Pengling Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tianjin Pengling is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anyang Iron Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anyang Iron Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Anyang Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tianjin Pengling and Anyang Iron

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

The idea behind Tianjin Pengling Rubber and Anyang Iron Steel 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.