Correlation Between Tianjin Ruixin and Zhongzhu Medical

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

Diversification Opportunities for Tianjin Ruixin and Zhongzhu Medical

0.58

Correlation Coefficient

Tianjin Ruixin  Zhongzhu Medical

Very weak diversification

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

Pair Corralation between Tianjin Ruixin and Zhongzhu Medical

Assuming the 90 days trading horizon Tianjin Ruixin Technology is expected to generate 1.81 times more return on investment than Zhongzhu Medical. However, Tianjin Ruixin is 1.81 times more volatile than Zhongzhu Medical Holdings. It trades about -0.16 of its potential returns per unit of risk. Zhongzhu Medical Holdings is currently generating about -0.33 per unit of risk. If you would invest  1,745  in Tianjin Ruixin Technology on October 7, 2024 and sell it today you would lose (260.00) from holding Tianjin Ruixin Technology or give up 14.9% of portfolio value over 90 days.

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

Tianjin Ruixin Technology  vs.  Zhongzhu Medical Holdings

Tianjin Ruixin Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tianjin Ruixin Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tianjin Ruixin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhongzhu Medical Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhongzhu Medical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhongzhu Medical 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 Zhongzhu Medical

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

The idea behind Tianjin Ruixin Technology and Zhongzhu Medical Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.