Correlation Between Tianjin Realty and Vats Liquor

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

Diversification Opportunities for Tianjin Realty and Vats Liquor

0.4

Correlation Coefficient

Tianjin Realty  Vats Liquor

Very weak diversification

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

Pair Corralation between Tianjin Realty and Vats Liquor

Assuming the 90 days trading horizon Tianjin Realty Development is expected to generate 1.13 times more return on investment than Vats Liquor. However, Tianjin Realty is 1.13 times more volatile than Vats Liquor Chain. It trades about 0.03 of its potential returns per unit of risk. Vats Liquor Chain is currently generating about 0.02 per unit of risk. If you would invest  216.00  in Tianjin Realty Development on October 9, 2024 and sell it today you would earn a total of  22.00  from holding Tianjin Realty Development or generate 10.19% 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.  Vats Liquor Chain

Tianjin Realty Devel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Realty Development are ranked lower than 11 (%) 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.

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Tianjin Realty Development and Vats Liquor Chain 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.