Correlation Between Tianjin Realty and Jiangsu Yueda

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

Diversification Opportunities for Tianjin Realty and Jiangsu Yueda

0.95

Correlation Coefficient

Tianjin Realty  Jiangsu Yueda

Almost no diversification

The 3 months correlation between Tianjin and Jiangsu is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Realty Development and Jiangsu Yueda Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Yueda Investment 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 Jiangsu Yueda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Yueda Investment has no effect on the direction of Tianjin Realty i.e., Tianjin Realty and Jiangsu Yueda go up and down completely randomly.

Pair Corralation between Tianjin Realty and Jiangsu Yueda

Assuming the 90 days trading horizon Tianjin Realty Development is expected to generate 1.8 times more return on investment than Jiangsu Yueda. However, Tianjin Realty is 1.8 times more volatile than Jiangsu Yueda Investment. It trades about 0.27 of its potential returns per unit of risk. Jiangsu Yueda Investment is currently generating about 0.23 per unit of risk. If you would invest  130.00  in Tianjin Realty Development on September 12, 2024 and sell it today you would earn a total of  147.00  from holding Tianjin Realty Development or generate 113.08% return on investment over 90 days.

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

Tianjin Realty Development  vs.  Jiangsu Yueda Investment

Tianjin Realty Devel

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Realty Development are ranked lower than 21 (%) 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.

Jiangsu Yueda Investment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Yueda Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Yueda sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianjin Realty and Jiangsu Yueda

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

The idea behind Tianjin Realty Development and Jiangsu Yueda Investment 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..