Correlation Between Shenzhen Fortune and Tianjin Realty

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

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

Diversification Opportunities for Shenzhen Fortune and Tianjin Realty

0.69

Correlation Coefficient

Shenzhen Fortune  Tianjin Realty

Poor diversification

The 3 months correlation between Shenzhen and Tianjin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen Fortune Trend and Tianjin Realty Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Realty Devel and Shenzhen Fortune 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 Shenzhen Fortune Trend are associated (or correlated) with Tianjin Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Realty Devel has no effect on the direction of Shenzhen Fortune i.e., Shenzhen Fortune and Tianjin Realty go up and down completely randomly.

Pair Corralation between Shenzhen Fortune and Tianjin Realty

Assuming the 90 days trading horizon Shenzhen Fortune Trend is expected to under-perform the Tianjin Realty. In addition to that, Shenzhen Fortune is 1.15 times more volatile than Tianjin Realty Development. It trades about -0.01 of its total potential returns per unit of risk. Tianjin Realty Development is currently generating about 0.1 per unit of volatility. If you would invest  253.00  in Tianjin Realty Development on October 6, 2024 and sell it today you would earn a total of  40.00  from holding Tianjin Realty Development or generate 15.81% return on investment over 90 days.

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

Shenzhen Fortune Trend  vs.  Tianjin Realty Development

Shenzhen Fortune Trend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Fortune Trend 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.

Tianjin Realty Devel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Realty Development are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Realty sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shenzhen Fortune and Tianjin Realty

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

The idea behind Shenzhen Fortune Trend and Tianjin Realty 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.

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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.