Correlation Between Tianjin Hi and Zhongshan Broad

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

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

Diversification Opportunities for Tianjin Hi and Zhongshan Broad

0.4

Correlation Coefficient

Tianjin Hi  Zhongshan Broad

Very weak diversification

The 3 months correlation between Tianjin and Zhongshan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Hi Tech Development and Zhongshan Broad Ocean Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongshan Broad Ocean and Tianjin 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 Tianjin Hi Tech Development are associated (or correlated) with Zhongshan Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongshan Broad Ocean has no effect on the direction of Tianjin Hi i.e., Tianjin Hi and Zhongshan Broad go up and down completely randomly.

Pair Corralation between Tianjin Hi and Zhongshan Broad

Assuming the 90 days trading horizon Tianjin Hi Tech Development is expected to under-perform the Zhongshan Broad. In addition to that, Tianjin Hi is 1.52 times more volatile than Zhongshan Broad Ocean Motor. It trades about 0.0 of its total potential returns per unit of risk. Zhongshan Broad Ocean Motor is currently generating about 0.02 per unit of volatility. If you would invest  525.00  in Zhongshan Broad Ocean Motor on October 24, 2024 and sell it today you would earn a total of  62.00  from holding Zhongshan Broad Ocean Motor or generate 11.81% return on investment over 90 days.

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

Tianjin Hi Tech Development  vs.  Zhongshan Broad Ocean Motor

Tianjin Hi Tech

Risk-Adjusted Performance

5 of 100

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 sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhongshan Broad Ocean

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Broad may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tianjin Hi and Zhongshan Broad

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

The idea behind Tianjin Hi Tech Development and Zhongshan Broad Ocean Motor 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.