Correlation Between Tianjin Ruixin and Shandong Polymer

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

Diversification Opportunities for Tianjin Ruixin and Shandong Polymer

0.77

Correlation Coefficient

Tianjin Ruixin  Shandong Polymer

Poor diversification

The 3 months correlation between Tianjin and Shandong is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Ruixin Technology and Shandong Polymer Biochemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Polymer Bio 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 Shandong Polymer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Polymer Bio has no effect on the direction of Tianjin Ruixin i.e., Tianjin Ruixin and Shandong Polymer go up and down completely randomly.

Pair Corralation between Tianjin Ruixin and Shandong Polymer

Assuming the 90 days trading horizon Tianjin Ruixin Technology is expected to generate 2.38 times more return on investment than Shandong Polymer. However, Tianjin Ruixin is 2.38 times more volatile than Shandong Polymer Biochemicals. It trades about 0.25 of its potential returns per unit of risk. Shandong Polymer Biochemicals is currently generating about 0.12 per unit of risk. If you would invest  1,326  in Tianjin Ruixin Technology on September 19, 2024 and sell it today you would earn a total of  407.00  from holding Tianjin Ruixin Technology or generate 30.69% return on investment over 90 days.

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

Tianjin Ruixin Technology  vs.  Shandong Polymer Biochemicals

Tianjin Ruixin Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Ruixin Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Ruixin sustained solid returns over the last few months and may actually be approaching a breakup point.

Shandong Polymer Bio

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Tianjin Ruixin and Shandong Polymer

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

The idea behind Tianjin Ruixin Technology and Shandong Polymer Biochemicals 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..