Correlation Between Tjk Machinery and Weichai Heavy

Can any of the company-specific risk be diversified away by investing in both Tjk Machinery and Weichai Heavy 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 Tjk Machinery and Weichai Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tjk Machinery Tianjin and Weichai Heavy Machinery, you can compare the effects of market volatilities on Tjk Machinery and Weichai Heavy 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 Tjk Machinery with a short position of Weichai Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tjk Machinery and Weichai Heavy.

Diversification Opportunities for Tjk Machinery and Weichai Heavy

0.44

Correlation Coefficient

Tjk Machinery  Weichai Heavy

Very weak diversification

The 3 months correlation between Tjk and Weichai is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Tjk Machinery Tianjin and Weichai Heavy Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weichai Heavy Machinery and Tjk Machinery 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 Tjk Machinery Tianjin are associated (or correlated) with Weichai Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weichai Heavy Machinery has no effect on the direction of Tjk Machinery i.e., Tjk Machinery and Weichai Heavy go up and down completely randomly.

Pair Corralation between Tjk Machinery and Weichai Heavy

Assuming the 90 days trading horizon Tjk Machinery is expected to generate 1.66 times less return on investment than Weichai Heavy. In addition to that, Tjk Machinery is 1.23 times more volatile than Weichai Heavy Machinery. It trades about 0.03 of its total potential returns per unit of risk. Weichai Heavy Machinery is currently generating about 0.06 per unit of volatility. If you would invest  924.00  in Weichai Heavy Machinery on October 4, 2024 and sell it today you would earn a total of  806.00  from holding Weichai Heavy Machinery or generate 87.23% return on investment over 90 days.

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

Tjk Machinery Tianjin  vs.  Weichai Heavy Machinery

Tjk Machinery Tianjin

Risk-Adjusted Performance

0 of 100

Very Weak

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

Weichai Heavy Machinery

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weichai Heavy Machinery are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Weichai Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tjk Machinery and Weichai Heavy

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

The idea behind Tjk Machinery Tianjin and Weichai Heavy Machinery 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.