Correlation Between TianJin 712 and Guotai Epoint

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

Diversification Opportunities for TianJin 712 and Guotai Epoint

0.39

Correlation Coefficient

TianJin 712  Guotai Epoint

Weak diversification

The 3 months correlation between TianJin and Guotai is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding TianJin 712 Communication and Guotai Epoint Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guotai Epoint Software 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 Guotai Epoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guotai Epoint Software has no effect on the direction of TianJin 712 i.e., TianJin 712 and Guotai Epoint go up and down completely randomly.

Pair Corralation between TianJin 712 and Guotai Epoint

Assuming the 90 days trading horizon TianJin 712 is expected to generate 2.81 times less return on investment than Guotai Epoint. But when comparing it to its historical volatility, TianJin 712 Communication is 1.34 times less risky than Guotai Epoint. It trades about 0.05 of its potential returns per unit of risk. Guotai Epoint Software is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,080  in Guotai Epoint Software on October 24, 2024 and sell it today you would earn a total of  756.00  from holding Guotai Epoint Software or generate 36.35% return on investment over 90 days.

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

TianJin 712 Communication  vs.  Guotai Epoint Software

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Guotai Epoint Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guotai Epoint Software 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 TianJin 712 and Guotai Epoint

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

The idea behind TianJin 712 Communication and Guotai Epoint Software 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.