Correlation Between Tianjin Capital and Ningbo Tech

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

Diversification Opportunities for Tianjin Capital and Ningbo Tech

0.35

Correlation Coefficient

Tianjin Capital  Ningbo Tech

Weak diversification

The 3 months correlation between Tianjin and Ningbo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and Ningbo Tech Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tech Bank 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 Ningbo Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tech Bank has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and Ningbo Tech go up and down completely randomly.

Pair Corralation between Tianjin Capital and Ningbo Tech

Assuming the 90 days trading horizon Tianjin Capital Environmental is expected to generate 0.55 times more return on investment than Ningbo Tech. However, Tianjin Capital Environmental is 1.82 times less risky than Ningbo Tech. It trades about -0.11 of its potential returns per unit of risk. Ningbo Tech Bank Co is currently generating about -0.11 per unit of risk. If you would invest  612.00  in Tianjin Capital Environmental on December 4, 2024 and sell it today you would lose (42.00) from holding Tianjin Capital Environmental or give up 6.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Tianjin Capital Environmental  vs.  Ningbo Tech Bank Co

Tianjin Capital Envi

Risk-Adjusted Performance

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 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.

Ningbo Tech Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ningbo Tech Bank Co 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tianjin Capital and Ningbo Tech

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

The idea behind Tianjin Capital Environmental and Ningbo Tech Bank Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.