Correlation Between Shanghai Broadband and Tjk Machinery

Can any of the company-specific risk be diversified away by investing in both Shanghai Broadband and Tjk Machinery 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 Shanghai Broadband and Tjk Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Broadband Technology and Tjk Machinery Tianjin, you can compare the effects of market volatilities on Shanghai Broadband and Tjk Machinery 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 Shanghai Broadband with a short position of Tjk Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Broadband and Tjk Machinery.

Diversification Opportunities for Shanghai Broadband and Tjk Machinery

0.42

Correlation Coefficient

Shanghai Broadband  Tjk Machinery

Very weak diversification

The 3 months correlation between Shanghai and Tjk is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Broadband Technology and Tjk Machinery Tianjin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tjk Machinery Tianjin and Shanghai Broadband 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 Shanghai Broadband Technology are associated (or correlated) with Tjk Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tjk Machinery Tianjin has no effect on the direction of Shanghai Broadband i.e., Shanghai Broadband and Tjk Machinery go up and down completely randomly.

Pair Corralation between Shanghai Broadband and Tjk Machinery

Assuming the 90 days trading horizon Shanghai Broadband Technology is expected to under-perform the Tjk Machinery. In addition to that, Shanghai Broadband is 1.04 times more volatile than Tjk Machinery Tianjin. It trades about -0.03 of its total potential returns per unit of risk. Tjk Machinery Tianjin is currently generating about 0.04 per unit of volatility. If you would invest  1,416  in Tjk Machinery Tianjin on December 25, 2024 and sell it today you would earn a total of  55.00  from holding Tjk Machinery Tianjin or generate 3.88% return on investment over 90 days.

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

Shanghai Broadband Technology  vs.  Tjk Machinery Tianjin

Shanghai Broadband

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Broadband Technology 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.

Tjk Machinery Tianjin

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tjk Machinery Tianjin are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tjk Machinery may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shanghai Broadband and Tjk Machinery

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

The idea behind Shanghai Broadband Technology and Tjk Machinery Tianjin 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.