Correlation Between TianJin 712 and Anhui Jinhe

Can any of the company-specific risk be diversified away by investing in both TianJin 712 and Anhui Jinhe 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 Anhui Jinhe 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 Anhui Jinhe Industrial, you can compare the effects of market volatilities on TianJin 712 and Anhui Jinhe 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 Anhui Jinhe. Check out your portfolio center. Please also check ongoing floating volatility patterns of TianJin 712 and Anhui Jinhe.

Diversification Opportunities for TianJin 712 and Anhui Jinhe

-0.06

Correlation Coefficient

TianJin 712  Anhui Jinhe

Good diversification

The 3 months correlation between TianJin and Anhui is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding TianJin 712 Communication and Anhui Jinhe Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Jinhe Industrial 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 Anhui Jinhe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Jinhe Industrial has no effect on the direction of TianJin 712 i.e., TianJin 712 and Anhui Jinhe go up and down completely randomly.

Pair Corralation between TianJin 712 and Anhui Jinhe

Assuming the 90 days trading horizon TianJin 712 Communication is expected to under-perform the Anhui Jinhe. In addition to that, TianJin 712 is 1.26 times more volatile than Anhui Jinhe Industrial. It trades about -0.04 of its total potential returns per unit of risk. Anhui Jinhe Industrial is currently generating about -0.02 per unit of volatility. If you would invest  3,153  in Anhui Jinhe Industrial on October 10, 2024 and sell it today you would lose (789.00) from holding Anhui Jinhe Industrial or give up 25.02% of portfolio value over 90 days.

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

TianJin 712 Communication  vs.  Anhui Jinhe Industrial

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.

Anhui Jinhe Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Jinhe Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Anhui Jinhe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TianJin 712 and Anhui Jinhe

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

The idea behind TianJin 712 Communication and Anhui Jinhe Industrial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.