Correlation Between Tjk Machinery and Sichuan Fulin

Can any of the company-specific risk be diversified away by investing in both Tjk Machinery and Sichuan Fulin 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 Sichuan Fulin 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 Sichuan Fulin Transportation, you can compare the effects of market volatilities on Tjk Machinery and Sichuan Fulin 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 Sichuan Fulin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tjk Machinery and Sichuan Fulin.

Diversification Opportunities for Tjk Machinery and Sichuan Fulin

0.67

Correlation Coefficient

Tjk Machinery  Sichuan Fulin

Poor diversification

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

Pair Corralation between Tjk Machinery and Sichuan Fulin

Assuming the 90 days trading horizon Tjk Machinery Tianjin is expected to generate 1.38 times more return on investment than Sichuan Fulin. However, Tjk Machinery is 1.38 times more volatile than Sichuan Fulin Transportation. It trades about 0.03 of its potential returns per unit of risk. Sichuan Fulin Transportation is currently generating about 0.02 per unit of risk. If you would invest  1,075  in Tjk Machinery Tianjin on October 4, 2024 and sell it today you would earn a total of  226.00  from holding Tjk Machinery Tianjin or generate 21.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Tjk Machinery Tianjin  vs.  Sichuan Fulin Transportation

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.

Sichuan Fulin Transp

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Fulin Transportation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Fulin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tjk Machinery and Sichuan Fulin

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

The idea behind Tjk Machinery Tianjin and Sichuan Fulin Transportation 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.