Correlation Between Tianjin Ruixin and Dongguan Aohai

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

Diversification Opportunities for Tianjin Ruixin and Dongguan Aohai

0.85

Correlation Coefficient

Tianjin Ruixin  Dongguan Aohai

Very poor diversification

The 3 months correlation between Tianjin and Dongguan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Ruixin Technology and Dongguan Aohai Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Aohai Technology 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 Dongguan Aohai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Aohai Technology has no effect on the direction of Tianjin Ruixin i.e., Tianjin Ruixin and Dongguan Aohai go up and down completely randomly.

Pair Corralation between Tianjin Ruixin and Dongguan Aohai

Assuming the 90 days trading horizon Tianjin Ruixin is expected to generate 1.29 times less return on investment than Dongguan Aohai. In addition to that, Tianjin Ruixin is 1.31 times more volatile than Dongguan Aohai Technology. It trades about 0.13 of its total potential returns per unit of risk. Dongguan Aohai Technology is currently generating about 0.23 per unit of volatility. If you would invest  3,299  in Dongguan Aohai Technology on September 26, 2024 and sell it today you would earn a total of  708.00  from holding Dongguan Aohai Technology or generate 21.46% return on investment over 90 days.

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

Tianjin Ruixin Technology  vs.  Dongguan Aohai Technology

Tianjin Ruixin Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Ruixin Technology are ranked lower than 10 (%) 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.

Dongguan Aohai Technology

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dongguan Aohai Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongguan Aohai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianjin Ruixin and Dongguan Aohai

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

The idea behind Tianjin Ruixin Technology and Dongguan Aohai Technology 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.