Correlation Between Tianjin Realty and Qingdao Haier

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

Diversification Opportunities for Tianjin Realty and Qingdao Haier

0.68

Correlation Coefficient

Tianjin Realty  Qingdao Haier

Poor diversification

The 3 months correlation between Tianjin and Qingdao is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Realty Development and Qingdao Haier Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingdao Haier Biomedical 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 Qingdao Haier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingdao Haier Biomedical has no effect on the direction of Tianjin Realty i.e., Tianjin Realty and Qingdao Haier go up and down completely randomly.

Pair Corralation between Tianjin Realty and Qingdao Haier

Assuming the 90 days trading horizon Tianjin Realty Development is expected to under-perform the Qingdao Haier. In addition to that, Tianjin Realty is 1.58 times more volatile than Qingdao Haier Biomedical. It trades about -0.19 of its total potential returns per unit of risk. Qingdao Haier Biomedical is currently generating about -0.16 per unit of volatility. If you would invest  3,520  in Qingdao Haier Biomedical on October 23, 2024 and sell it today you would lose (328.00) from holding Qingdao Haier Biomedical or give up 9.32% of portfolio value over 90 days.

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

Tianjin Realty Development  vs.  Qingdao Haier Biomedical

Tianjin Realty Devel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Realty Development are ranked lower than 6 (%) 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.

Qingdao Haier Biomedical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qingdao Haier Biomedical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Qingdao Haier 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 Qingdao Haier

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

The idea behind Tianjin Realty Development and Qingdao Haier Biomedical 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..