Correlation Between Tianjin Silvery and Chengdu Xinzhu

Can any of the company-specific risk be diversified away by investing in both Tianjin Silvery and Chengdu Xinzhu 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 Chengdu Xinzhu 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 Chengdu Xinzhu RoadBridge, you can compare the effects of market volatilities on Tianjin Silvery and Chengdu Xinzhu 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 Chengdu Xinzhu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tianjin Silvery and Chengdu Xinzhu.

Diversification Opportunities for Tianjin Silvery and Chengdu Xinzhu

-0.04

Correlation Coefficient

Tianjin Silvery  Chengdu Xinzhu

Good diversification

The 3 months correlation between Tianjin and Chengdu is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Tianjin Silvery Dragon and Chengdu Xinzhu RoadBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Xinzhu RoadBridge 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 Chengdu Xinzhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Xinzhu RoadBridge has no effect on the direction of Tianjin Silvery i.e., Tianjin Silvery and Chengdu Xinzhu go up and down completely randomly.

Pair Corralation between Tianjin Silvery and Chengdu Xinzhu

Assuming the 90 days trading horizon Tianjin Silvery is expected to generate 2.75 times less return on investment than Chengdu Xinzhu. But when comparing it to its historical volatility, Tianjin Silvery Dragon is 1.17 times less risky than Chengdu Xinzhu. It trades about 0.02 of its potential returns per unit of risk. Chengdu Xinzhu RoadBridge is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  508.00  in Chengdu Xinzhu RoadBridge on December 25, 2024 and sell it today you would earn a total of  23.00  from holding Chengdu Xinzhu RoadBridge or generate 4.53% return on investment over 90 days.

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

Tianjin Silvery Dragon  vs.  Chengdu Xinzhu RoadBridge

Tianjin Silvery Dragon

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Silvery Dragon are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Chengdu Xinzhu RoadBridge

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Xinzhu RoadBridge are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Xinzhu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tianjin Silvery and Chengdu Xinzhu

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

The idea behind Tianjin Silvery Dragon and Chengdu Xinzhu RoadBridge 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.