Correlation Between Ping An and Tianjin Realty

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

By analyzing existing cross correlation between Ping An Insurance and Tianjin Realty Development, you can compare the effects of market volatilities on Ping An and Tianjin Realty 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 Ping An with a short position of Tianjin Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Tianjin Realty.

Diversification Opportunities for Ping An and Tianjin Realty

0.55

Correlation Coefficient

Ping An  Tianjin Realty

Very weak diversification

The 3 months correlation between Ping and Tianjin is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Tianjin Realty Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Realty Devel and Ping An 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 Ping An Insurance are associated (or correlated) with Tianjin Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Realty Devel has no effect on the direction of Ping An i.e., Ping An and Tianjin Realty go up and down completely randomly.

Pair Corralation between Ping An and Tianjin Realty

Assuming the 90 days trading horizon Ping An Insurance is expected to under-perform the Tianjin Realty. But the stock apears to be less risky and, when comparing its historical volatility, Ping An Insurance is 3.52 times less risky than Tianjin Realty. The stock trades about -0.02 of its potential returns per unit of risk. The Tianjin Realty Development is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  228.00  in Tianjin Realty Development on September 23, 2024 and sell it today you would earn a total of  44.00  from holding Tianjin Realty Development or generate 19.3% return on investment over 90 days.

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

Ping An Insurance  vs.  Tianjin Realty Development

Ping An Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Tianjin Realty Devel

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Realty Development are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Realty sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Tianjin Realty

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

The idea behind Ping An Insurance and Tianjin Realty Development 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.