Correlation Between Tianjin Hi-Tech and Industrial

Can any of the company-specific risk be diversified away by investing in both Tianjin Hi-Tech and Industrial 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-Tech and Industrial 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 Industrial and Commercial, you can compare the effects of market volatilities on Tianjin Hi-Tech and Industrial 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-Tech with a short position of Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Hi-Tech and Industrial.

Diversification Opportunities for Tianjin Hi-Tech and Industrial

-0.43

Correlation Coefficient

Tianjin Hi-Tech  Industrial

Very good diversification

The 3 months correlation between Tianjin and Industrial is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Hi Tech Development and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and Tianjin Hi-Tech 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Tianjin Hi-Tech i.e., Tianjin Hi-Tech and Industrial go up and down completely randomly.

Pair Corralation between Tianjin Hi-Tech and Industrial

Assuming the 90 days trading horizon Tianjin Hi Tech Development is expected to under-perform the Industrial. In addition to that, Tianjin Hi-Tech is 2.37 times more volatile than Industrial and Commercial. It trades about -0.01 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.13 per unit of volatility. If you would invest  626.00  in Industrial and Commercial on December 4, 2024 and sell it today you would earn a total of  59.00  from holding Industrial and Commercial or generate 9.42% return on investment over 90 days.

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

Tianjin Hi Tech Development  vs.  Industrial and Commercial

Tianjin Hi Tech

Risk-Adjusted Performance

Very Weak

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

Industrial and Commercial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tianjin Hi-Tech and Industrial

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

The idea behind Tianjin Hi Tech Development and Industrial and Commercial 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.