Correlation Between Tianjin Capital and Nanjing Putian

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

Diversification Opportunities for Tianjin Capital and Nanjing Putian

0.58

Correlation Coefficient

Tianjin Capital  Nanjing Putian

Very weak diversification

The 3 months correlation between Tianjin and Nanjing is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and Nanjing Putian Telecommunicati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing Putian Telec 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 Nanjing Putian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing Putian Telec has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and Nanjing Putian go up and down completely randomly.

Pair Corralation between Tianjin Capital and Nanjing Putian

Assuming the 90 days trading horizon Tianjin Capital Environmental is expected to under-perform the Nanjing Putian. But the stock apears to be less risky and, when comparing its historical volatility, Tianjin Capital Environmental is 3.77 times less risky than Nanjing Putian. The stock trades about -0.26 of its potential returns per unit of risk. The Nanjing Putian Telecommunications is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  412.00  in Nanjing Putian Telecommunications on October 25, 2024 and sell it today you would lose (23.00) from holding Nanjing Putian Telecommunications or give up 5.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Tianjin Capital Environmental  vs.  Nanjing Putian Telecommunicati

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.

Nanjing Putian Telec

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Putian may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tianjin Capital and Nanjing Putian

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

The idea behind Tianjin Capital Environmental and Nanjing Putian Telecommunications 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.