Correlation Between Qingdao Hi and Tianjin Hi-Tech

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

By analyzing existing cross correlation between Qingdao Hi Tech Moulds and Tianjin Hi Tech Development, you can compare the effects of market volatilities on Qingdao Hi and Tianjin Hi-Tech 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 Qingdao Hi with a short position of Tianjin Hi-Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qingdao Hi and Tianjin Hi-Tech.

Diversification Opportunities for Qingdao Hi and Tianjin Hi-Tech

0.69

Correlation Coefficient

Qingdao Hi  Tianjin Hi-Tech

Poor diversification

The 3 months correlation between Qingdao and Tianjin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Qingdao Hi Tech Moulds and Tianjin Hi Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Hi Tech and Qingdao Hi 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 Qingdao Hi Tech Moulds are associated (or correlated) with Tianjin Hi-Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Hi Tech has no effect on the direction of Qingdao Hi i.e., Qingdao Hi and Tianjin Hi-Tech go up and down completely randomly.

Pair Corralation between Qingdao Hi and Tianjin Hi-Tech

Assuming the 90 days trading horizon Qingdao Hi Tech Moulds is expected to generate 2.17 times more return on investment than Tianjin Hi-Tech. However, Qingdao Hi is 2.17 times more volatile than Tianjin Hi Tech Development. It trades about 0.13 of its potential returns per unit of risk. Tianjin Hi Tech Development is currently generating about 0.07 per unit of risk. If you would invest  2,030  in Qingdao Hi Tech Moulds on December 31, 2024 and sell it today you would earn a total of  640.00  from holding Qingdao Hi Tech Moulds or generate 31.53% return on investment over 90 days.

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

Qingdao Hi Tech Moulds  vs.  Tianjin Hi Tech Development

Qingdao Hi Tech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Hi Tech Moulds are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qingdao Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Tianjin Hi Tech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Hi Tech Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Hi-Tech may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Qingdao Hi and Tianjin Hi-Tech

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

The idea behind Qingdao Hi Tech Moulds and Tianjin Hi Tech Development 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.