Correlation Between Tianjin Capital and Shenzhen Centralcon

Can any of the company-specific risk be diversified away by investing in both Tianjin Capital and Shenzhen Centralcon 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 Capital and Shenzhen Centralcon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tianjin Capital Environmental and Shenzhen Centralcon Investment, you can compare the effects of market volatilities on Tianjin Capital and Shenzhen Centralcon 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 Capital with a short position of Shenzhen Centralcon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Capital and Shenzhen Centralcon.

Diversification Opportunities for Tianjin Capital and Shenzhen Centralcon

0.77

Correlation Coefficient

Tianjin Capital  Shenzhen Centralcon

Poor diversification

The 3 months correlation between Tianjin and Shenzhen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and Shenzhen Centralcon Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Centralcon and Tianjin Capital 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 Capital Environmental are associated (or correlated) with Shenzhen Centralcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Centralcon has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and Shenzhen Centralcon go up and down completely randomly.

Pair Corralation between Tianjin Capital and Shenzhen Centralcon

Assuming the 90 days trading horizon Tianjin Capital is expected to generate 1.4 times less return on investment than Shenzhen Centralcon. But when comparing it to its historical volatility, Tianjin Capital Environmental is 1.74 times less risky than Shenzhen Centralcon. It trades about 0.05 of its potential returns per unit of risk. Shenzhen Centralcon Investment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  406.00  in Shenzhen Centralcon Investment on October 4, 2024 and sell it today you would earn a total of  41.00  from holding Shenzhen Centralcon Investment or generate 10.1% return on investment over 90 days.

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

Tianjin Capital Environmental  vs.  Shenzhen Centralcon Investment

Tianjin Capital Envi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shenzhen Centralcon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Centralcon Investment 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.

Pair Trading with Tianjin Capital and Shenzhen Centralcon

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

The idea behind Tianjin Capital Environmental and Shenzhen Centralcon Investment 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.