Correlation Between Tianjin Silvery and Ningxia Younglight

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

By analyzing existing cross correlation between Tianjin Silvery Dragon and Ningxia Younglight Chemicals, you can compare the effects of market volatilities on Tianjin Silvery and Ningxia Younglight 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 Silvery with a short position of Ningxia Younglight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Silvery and Ningxia Younglight.

Diversification Opportunities for Tianjin Silvery and Ningxia Younglight

0.25

Correlation Coefficient

Tianjin Silvery  Ningxia Younglight

Modest diversification

The 3 months correlation between Tianjin and Ningxia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Silvery Dragon and Ningxia Younglight Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningxia Younglight and Tianjin Silvery 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 Silvery Dragon are associated (or correlated) with Ningxia Younglight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningxia Younglight has no effect on the direction of Tianjin Silvery i.e., Tianjin Silvery and Ningxia Younglight go up and down completely randomly.

Pair Corralation between Tianjin Silvery and Ningxia Younglight

Assuming the 90 days trading horizon Tianjin Silvery Dragon is expected to under-perform the Ningxia Younglight. In addition to that, Tianjin Silvery is 1.44 times more volatile than Ningxia Younglight Chemicals. It trades about -0.01 of its total potential returns per unit of risk. Ningxia Younglight Chemicals is currently generating about 0.01 per unit of volatility. If you would invest  811.00  in Ningxia Younglight Chemicals on December 26, 2024 and sell it today you would lose (3.00) from holding Ningxia Younglight Chemicals or give up 0.37% of portfolio value over 90 days.

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

Tianjin Silvery Dragon  vs.  Ningxia Younglight Chemicals

Tianjin Silvery Dragon

Risk-Adjusted Performance

Very Weak

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

Ningxia Younglight

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ningxia Younglight Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ningxia Younglight 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 Silvery and Ningxia Younglight

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

The idea behind Tianjin Silvery Dragon and Ningxia Younglight Chemicals 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.