Correlation Between Shanghai CEO and Tianjin Ruixin

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

By analyzing existing cross correlation between Shanghai CEO Environmental and Tianjin Ruixin Technology, you can compare the effects of market volatilities on Shanghai CEO and Tianjin Ruixin 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 Shanghai CEO with a short position of Tianjin Ruixin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai CEO and Tianjin Ruixin.

Diversification Opportunities for Shanghai CEO and Tianjin Ruixin

0.2

Correlation Coefficient

Shanghai CEO  Tianjin Ruixin

Modest diversification

The 3 months correlation between Shanghai and Tianjin is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai CEO Environmental and Tianjin Ruixin Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Ruixin Technology and Shanghai CEO 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 Shanghai CEO Environmental are associated (or correlated) with Tianjin Ruixin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Ruixin Technology has no effect on the direction of Shanghai CEO i.e., Shanghai CEO and Tianjin Ruixin go up and down completely randomly.

Pair Corralation between Shanghai CEO and Tianjin Ruixin

Assuming the 90 days trading horizon Shanghai CEO Environmental is expected to under-perform the Tianjin Ruixin. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai CEO Environmental is 1.71 times less risky than Tianjin Ruixin. The stock trades about -0.08 of its potential returns per unit of risk. The Tianjin Ruixin Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,382  in Tianjin Ruixin Technology on October 25, 2024 and sell it today you would earn a total of  67.00  from holding Tianjin Ruixin Technology or generate 4.85% return on investment over 90 days.

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

Shanghai CEO Environmental  vs.  Tianjin Ruixin Technology

Shanghai CEO Environ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai CEO Environmental 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 Ruixin Technology

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Ruixin Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Ruixin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shanghai CEO and Tianjin Ruixin

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

The idea behind Shanghai CEO Environmental and Tianjin Ruixin Technology 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 Commodity Directory module to find actively traded commodities issued by global exchanges.