Correlation Between Tianjin You and Liuzhou Chemical

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

By analyzing existing cross correlation between Tianjin You Fa and Liuzhou Chemical Industry, you can compare the effects of market volatilities on Tianjin You and Liuzhou Chemical 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 You with a short position of Liuzhou Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin You and Liuzhou Chemical.

Diversification Opportunities for Tianjin You and Liuzhou Chemical

0.35

Correlation Coefficient

Tianjin You  Liuzhou Chemical

Weak diversification

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

Pair Corralation between Tianjin You and Liuzhou Chemical

Assuming the 90 days trading horizon Tianjin You Fa is expected to generate 0.61 times more return on investment than Liuzhou Chemical. However, Tianjin You Fa is 1.63 times less risky than Liuzhou Chemical. It trades about -0.02 of its potential returns per unit of risk. Liuzhou Chemical Industry is currently generating about -0.02 per unit of risk. If you would invest  610.00  in Tianjin You Fa on October 9, 2024 and sell it today you would lose (81.00) from holding Tianjin You Fa or give up 13.28% of portfolio value over 90 days.

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

Tianjin You Fa  vs.  Liuzhou Chemical Industry

Tianjin You Fa

Risk-Adjusted Performance

0 of 100

Very Weak

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

Liuzhou Chemical Industry

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liuzhou Chemical Industry are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liuzhou Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tianjin You and Liuzhou Chemical

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

The idea behind Tianjin You Fa and Liuzhou Chemical Industry 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.