Correlation Between Tianjin Ruixin and Hainan Expressway

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

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

Diversification Opportunities for Tianjin Ruixin and Hainan Expressway

0.65

Correlation Coefficient

Tianjin Ruixin  Hainan Expressway

Poor diversification

The 3 months correlation between Tianjin and Hainan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Ruixin Technology and Hainan Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Expressway and Tianjin Ruixin 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 Ruixin Technology are associated (or correlated) with Hainan Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Expressway has no effect on the direction of Tianjin Ruixin i.e., Tianjin Ruixin and Hainan Expressway go up and down completely randomly.

Pair Corralation between Tianjin Ruixin and Hainan Expressway

Assuming the 90 days trading horizon Tianjin Ruixin is expected to generate 2.19 times less return on investment than Hainan Expressway. In addition to that, Tianjin Ruixin is 1.01 times more volatile than Hainan Expressway Co. It trades about 0.04 of its total potential returns per unit of risk. Hainan Expressway Co is currently generating about 0.08 per unit of volatility. If you would invest  513.00  in Hainan Expressway Co on October 25, 2024 and sell it today you would earn a total of  93.00  from holding Hainan Expressway Co or generate 18.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Tianjin Ruixin Technology  vs.  Hainan Expressway Co

Tianjin Ruixin Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Ruixin Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Ruixin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hainan Expressway

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Tianjin Ruixin and Hainan Expressway

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

The idea behind Tianjin Ruixin Technology and Hainan Expressway 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.