Correlation Between Tianjin Realty and AUPU Home

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

Diversification Opportunities for Tianjin Realty and AUPU Home

0.7

Correlation Coefficient

Tianjin Realty  AUPU Home

Poor diversification

The 3 months correlation between Tianjin and AUPU is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Realty Development and AUPU Home Style in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUPU Home Style 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 AUPU Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUPU Home Style has no effect on the direction of Tianjin Realty i.e., Tianjin Realty and AUPU Home go up and down completely randomly.

Pair Corralation between Tianjin Realty and AUPU Home

Assuming the 90 days trading horizon Tianjin Realty Development is expected to under-perform the AUPU Home. In addition to that, Tianjin Realty is 2.15 times more volatile than AUPU Home Style. It trades about -0.05 of its total potential returns per unit of risk. AUPU Home Style is currently generating about -0.02 per unit of volatility. If you would invest  1,090  in AUPU Home Style on December 25, 2024 and sell it today you would lose (32.00) from holding AUPU Home Style or give up 2.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Tianjin Realty Development  vs.  AUPU Home Style

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

AUPU Home Style

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Tianjin Realty Development and AUPU Home Style 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.