Correlation Between Tianjin Capital and Guangdong Marubi

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

Diversification Opportunities for Tianjin Capital and Guangdong Marubi

0.91

Correlation Coefficient

Tianjin Capital  Guangdong Marubi

Almost no diversification

The 3 months correlation between Tianjin and Guangdong is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Capital Environmental and Guangdong Marubi Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Marubi Bio 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 Guangdong Marubi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Marubi Bio has no effect on the direction of Tianjin Capital i.e., Tianjin Capital and Guangdong Marubi go up and down completely randomly.

Pair Corralation between Tianjin Capital and Guangdong Marubi

Assuming the 90 days trading horizon Tianjin Capital Environmental is not expected to generate positive returns. However, Tianjin Capital Environmental is 2.5 times less risky than Guangdong Marubi. It waists most of its returns potential to compensate for thr risk taken. Guangdong Marubi is generating about 0.11 per unit of risk. If you would invest  3,004  in Guangdong Marubi Biotechnology on September 20, 2024 and sell it today you would earn a total of  198.00  from holding Guangdong Marubi Biotechnology or generate 6.59% return on investment over 90 days.

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

Tianjin Capital Environmental  vs.  Guangdong Marubi Biotechnology

Tianjin Capital Envi

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Marubi Bio

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Marubi Biotechnology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Marubi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tianjin Capital and Guangdong Marubi

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

The idea behind Tianjin Capital Environmental and Guangdong Marubi Biotechnology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.