Correlation Between Tianjin Realty and Zoy Home

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

Diversification Opportunities for Tianjin Realty and Zoy Home

0.2

Correlation Coefficient

Tianjin Realty  Zoy Home

Modest diversification

The 3 months correlation between Tianjin and Zoy is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Realty Development and Zoy Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoy Home Furnishing 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 Zoy Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoy Home Furnishing has no effect on the direction of Tianjin Realty i.e., Tianjin Realty and Zoy Home go up and down completely randomly.

Pair Corralation between Tianjin Realty and Zoy Home

Assuming the 90 days trading horizon Tianjin Realty Development is expected to under-perform the Zoy Home. In addition to that, Tianjin Realty is 1.42 times more volatile than Zoy Home Furnishing. It trades about -0.05 of its total potential returns per unit of risk. Zoy Home Furnishing is currently generating about 0.08 per unit of volatility. If you would invest  1,033  in Zoy Home Furnishing on December 25, 2024 and sell it today you would earn a total of  109.00  from holding Zoy Home Furnishing or generate 10.55% return on investment over 90 days.

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

Tianjin Realty Development  vs.  Zoy Home Furnishing

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.

Zoy Home Furnishing

Risk-Adjusted Performance

Modest

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

Pair Trading with Tianjin Realty and Zoy Home

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

The idea behind Tianjin Realty Development and Zoy Home Furnishing 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.