Correlation Between China Marine and Tjk Machinery

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

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

Diversification Opportunities for China Marine and Tjk Machinery

0.08

Correlation Coefficient

China Marine  Tjk Machinery

Significant diversification

The 3 months correlation between China and Tjk is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding China Marine Information 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 China Marine 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 China Marine Information 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 China Marine i.e., China Marine and Tjk Machinery go up and down completely randomly.

Pair Corralation between China Marine and Tjk Machinery

Assuming the 90 days trading horizon China Marine Information is expected to generate 1.31 times more return on investment than Tjk Machinery. However, China Marine is 1.31 times more volatile than Tjk Machinery Tianjin. It trades about -0.03 of its potential returns per unit of risk. Tjk Machinery Tianjin is currently generating about -0.32 per unit of risk. If you would invest  2,656  in China Marine Information on October 6, 2024 and sell it today you would lose (105.00) from holding China Marine Information or give up 3.95% of portfolio value over 90 days.

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

China Marine Information  vs.  Tjk Machinery Tianjin

China Marine Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Marine Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tjk Machinery Tianjin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tjk Machinery Tianjin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Marine and Tjk Machinery

The main advantage of trading using opposite China Marine and Tjk Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Marine 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 China Marine Information 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.