Correlation Between Tianjin Ruixin and Shanghai Yaoji

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

Diversification Opportunities for Tianjin Ruixin and Shanghai Yaoji

0.58

Correlation Coefficient

Tianjin Ruixin  Shanghai Yaoji

Very weak diversification

The 3 months correlation between Tianjin and Shanghai is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Ruixin Technology and Shanghai Yaoji Playing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yaoji Playing 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 Shanghai Yaoji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yaoji Playing has no effect on the direction of Tianjin Ruixin i.e., Tianjin Ruixin and Shanghai Yaoji go up and down completely randomly.

Pair Corralation between Tianjin Ruixin and Shanghai Yaoji

Assuming the 90 days trading horizon Tianjin Ruixin Technology is expected to generate 0.94 times more return on investment than Shanghai Yaoji. However, Tianjin Ruixin Technology is 1.06 times less risky than Shanghai Yaoji. It trades about 0.1 of its potential returns per unit of risk. Shanghai Yaoji Playing is currently generating about 0.02 per unit of risk. If you would invest  1,581  in Tianjin Ruixin Technology on December 27, 2024 and sell it today you would earn a total of  231.00  from holding Tianjin Ruixin Technology or generate 14.61% return on investment over 90 days.

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

Tianjin Ruixin Technology  vs.  Shanghai Yaoji Playing

Tianjin Ruixin Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Ruixin Technology are ranked lower than 7 (%) 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.

Shanghai Yaoji Playing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Yaoji Playing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shanghai Yaoji is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tianjin Ruixin and Shanghai Yaoji

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

The idea behind Tianjin Ruixin Technology and Shanghai Yaoji Playing 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.