Correlation Between Tjk Machinery and China Merchants

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

Diversification Opportunities for Tjk Machinery and China Merchants

0.7

Correlation Coefficient

Tjk Machinery  China Merchants

Poor diversification

The 3 months correlation between Tjk and China is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tjk Machinery Tianjin and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of Tjk Machinery i.e., Tjk Machinery and China Merchants go up and down completely randomly.

Pair Corralation between Tjk Machinery and China Merchants

Assuming the 90 days trading horizon Tjk Machinery Tianjin is expected to generate 2.14 times more return on investment than China Merchants. However, Tjk Machinery is 2.14 times more volatile than China Merchants Bank. It trades about 0.06 of its potential returns per unit of risk. China Merchants Bank is currently generating about -0.05 per unit of risk. If you would invest  1,330  in Tjk Machinery Tianjin on September 22, 2024 and sell it today you would earn a total of  73.00  from holding Tjk Machinery Tianjin or generate 5.49% return on investment over 90 days.

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

Tjk Machinery Tianjin  vs.  China Merchants Bank

Tjk Machinery Tianjin

Risk-Adjusted Performance

11 of 100

Good

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

China Merchants Bank

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Tjk Machinery and China Merchants

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

The idea behind Tjk Machinery Tianjin and China Merchants Bank 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.