Correlation Between Mengtian Home and Tianjin Songjiang

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

By analyzing existing cross correlation between Mengtian Home Group and Tianjin Songjiang Co, you can compare the effects of market volatilities on Mengtian Home and Tianjin Songjiang 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 Mengtian Home with a short position of Tianjin Songjiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mengtian Home and Tianjin Songjiang.

Diversification Opportunities for Mengtian Home and Tianjin Songjiang

-0.54

Correlation Coefficient

Mengtian Home  Tianjin Songjiang

Excellent diversification

The 3 months correlation between Mengtian and Tianjin is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mengtian Home Group and Tianjin Songjiang Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Songjiang and Mengtian Home 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 Mengtian Home Group are associated (or correlated) with Tianjin Songjiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Songjiang has no effect on the direction of Mengtian Home i.e., Mengtian Home and Tianjin Songjiang go up and down completely randomly.

Pair Corralation between Mengtian Home and Tianjin Songjiang

Assuming the 90 days trading horizon Mengtian Home Group is expected to generate 1.73 times more return on investment than Tianjin Songjiang. However, Mengtian Home is 1.73 times more volatile than Tianjin Songjiang Co. It trades about 0.05 of its potential returns per unit of risk. Tianjin Songjiang Co is currently generating about -0.08 per unit of risk. If you would invest  1,093  in Mengtian Home Group on October 8, 2024 and sell it today you would earn a total of  26.00  from holding Mengtian Home Group or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Mengtian Home Group  vs.  Tianjin Songjiang Co

Mengtian Home Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mengtian Home Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mengtian Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tianjin Songjiang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tianjin Songjiang 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mengtian Home and Tianjin Songjiang

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

The idea behind Mengtian Home Group and Tianjin Songjiang 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.