Correlation Between TianJin 712 and Tieling Newcity

Can any of the company-specific risk be diversified away by investing in both TianJin 712 and Tieling Newcity 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 712 and Tieling Newcity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TianJin 712 Communication and Tieling Newcity Investment, you can compare the effects of market volatilities on TianJin 712 and Tieling Newcity 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 712 with a short position of Tieling Newcity. Check out your portfolio center. Please also check ongoing floating volatility patterns of TianJin 712 and Tieling Newcity.

Diversification Opportunities for TianJin 712 and Tieling Newcity

0.71

Correlation Coefficient

TianJin 712  Tieling Newcity

Poor diversification

The 3 months correlation between TianJin and Tieling is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding TianJin 712 Communication and Tieling Newcity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tieling Newcity Inve and TianJin 712 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 712 Communication are associated (or correlated) with Tieling Newcity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tieling Newcity Inve has no effect on the direction of TianJin 712 i.e., TianJin 712 and Tieling Newcity go up and down completely randomly.

Pair Corralation between TianJin 712 and Tieling Newcity

Assuming the 90 days trading horizon TianJin 712 is expected to generate 1.6 times less return on investment than Tieling Newcity. In addition to that, TianJin 712 is 1.33 times more volatile than Tieling Newcity Investment. It trades about 0.08 of its total potential returns per unit of risk. Tieling Newcity Investment is currently generating about 0.17 per unit of volatility. If you would invest  275.00  in Tieling Newcity Investment on October 4, 2024 and sell it today you would earn a total of  31.00  from holding Tieling Newcity Investment or generate 11.27% return on investment over 90 days.

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

TianJin 712 Communication  vs.  Tieling Newcity Investment

TianJin 712 Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TianJin 712 Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TianJin 712 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tieling Newcity Inve

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tieling Newcity Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tieling Newcity sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TianJin 712 and Tieling Newcity

The main advantage of trading using opposite TianJin 712 and Tieling Newcity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TianJin 712 position performs unexpectedly, Tieling Newcity 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 Tieling Newcity will offset losses from the drop in Tieling Newcity's long position.

The idea behind TianJin 712 Communication and Tieling Newcity Investment 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.