Correlation Between Tianjin Realty and Longmaster Information

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

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

Diversification Opportunities for Tianjin Realty and Longmaster Information

0.53

Correlation Coefficient

Tianjin Realty  Longmaster Information

Very weak diversification

The 3 months correlation between Tianjin and Longmaster is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Realty Development and Longmaster Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longmaster Information and Tianjin Realty 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 Realty Development are associated (or correlated) with Longmaster Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longmaster Information has no effect on the direction of Tianjin Realty i.e., Tianjin Realty and Longmaster Information go up and down completely randomly.

Pair Corralation between Tianjin Realty and Longmaster Information

Assuming the 90 days trading horizon Tianjin Realty is expected to generate 1.98 times less return on investment than Longmaster Information. But when comparing it to its historical volatility, Tianjin Realty Development is 1.13 times less risky than Longmaster Information. It trades about 0.02 of its potential returns per unit of risk. Longmaster Information Tech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,162  in Longmaster Information Tech on October 23, 2024 and sell it today you would earn a total of  240.00  from holding Longmaster Information Tech or generate 20.65% return on investment over 90 days.

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

Tianjin Realty Development  vs.  Longmaster Information Tech

Tianjin Realty Devel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Realty Development are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Realty sustained solid returns over the last few months and may actually be approaching a breakup point.

Longmaster Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Longmaster Information Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Longmaster Information 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 Realty and Longmaster Information

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

The idea behind Tianjin Realty Development and Longmaster Information Tech 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..