Correlation Between RoadMain T and Tianjin Hi

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

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

Diversification Opportunities for RoadMain T and Tianjin Hi

0.42

Correlation Coefficient

RoadMain T  Tianjin Hi

Very weak diversification

The 3 months correlation between RoadMain and Tianjin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding RoadMain T Co and Tianjin Hi Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Hi Tech and RoadMain T 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 RoadMain T Co are associated (or correlated) with Tianjin Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Hi Tech has no effect on the direction of RoadMain T i.e., RoadMain T and Tianjin Hi go up and down completely randomly.

Pair Corralation between RoadMain T and Tianjin Hi

Assuming the 90 days trading horizon RoadMain T Co is expected to under-perform the Tianjin Hi. But the stock apears to be less risky and, when comparing its historical volatility, RoadMain T Co is 1.4 times less risky than Tianjin Hi. The stock trades about -0.17 of its potential returns per unit of risk. The Tianjin Hi Tech Development is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  306.00  in Tianjin Hi Tech Development on October 26, 2024 and sell it today you would lose (20.00) from holding Tianjin Hi Tech Development or give up 6.54% of portfolio value over 90 days.

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

RoadMain T Co  vs.  Tianjin Hi Tech Development

RoadMain T

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RoadMain T 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.

Tianjin Hi Tech

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with RoadMain T and Tianjin Hi

The main advantage of trading using opposite RoadMain T and Tianjin Hi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RoadMain T position performs unexpectedly, Tianjin Hi 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 Hi will offset losses from the drop in Tianjin Hi's long position.

The idea behind RoadMain T Co and Tianjin Hi Tech Development 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.