Correlation Between Tianjin Realty and Hengerda New

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

Diversification Opportunities for Tianjin Realty and Hengerda New

0.13

Correlation Coefficient

Tianjin Realty  Hengerda New

Average diversification

The 3 months correlation between Tianjin and Hengerda is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Realty Development and Hengerda New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengerda New Materials 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 Hengerda New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengerda New Materials has no effect on the direction of Tianjin Realty i.e., Tianjin Realty and Hengerda New go up and down completely randomly.

Pair Corralation between Tianjin Realty and Hengerda New

Assuming the 90 days trading horizon Tianjin Realty is expected to generate 14.13 times less return on investment than Hengerda New. In addition to that, Tianjin Realty is 1.02 times more volatile than Hengerda New Materials. It trades about 0.0 of its total potential returns per unit of risk. Hengerda New Materials is currently generating about 0.05 per unit of volatility. If you would invest  2,938  in Hengerda New Materials on December 3, 2024 and sell it today you would earn a total of  232.00  from holding Hengerda New Materials or generate 7.9% return on investment over 90 days.

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

Tianjin Realty Development  vs.  Hengerda New Materials

Tianjin Realty Devel

Risk-Adjusted Performance

Very Weak

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

Hengerda New Materials

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hengerda New Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hengerda New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianjin Realty and Hengerda New

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

The idea behind Tianjin Realty Development and Hengerda New Materials 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.