Correlation Between CHAODA MODERN and Tianjin Capital

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

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

Diversification Opportunities for CHAODA MODERN and Tianjin Capital

-0.41

Correlation Coefficient

CHAODA MODERN  Tianjin Capital

Very good diversification

The 3 months correlation between CHAODA and Tianjin is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding CHAODA MODERN AGRI and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi and CHAODA MODERN 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 CHAODA MODERN AGRI are associated (or correlated) with Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of CHAODA MODERN i.e., CHAODA MODERN and Tianjin Capital go up and down completely randomly.

Pair Corralation between CHAODA MODERN and Tianjin Capital

Assuming the 90 days trading horizon CHAODA MODERN AGRI is expected to generate 2.39 times more return on investment than Tianjin Capital. However, CHAODA MODERN is 2.39 times more volatile than Tianjin Capital Environmental. It trades about 0.04 of its potential returns per unit of risk. Tianjin Capital Environmental is currently generating about 0.06 per unit of risk. If you would invest  6.00  in CHAODA MODERN AGRI on September 24, 2024 and sell it today you would lose (4.00) from holding CHAODA MODERN AGRI or give up 66.67% of portfolio value over 90 days.

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

CHAODA MODERN AGRI  vs.  Tianjin Capital Environmental

CHAODA MODERN AGRI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHAODA MODERN AGRI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Tianjin Capital Envi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tianjin Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHAODA MODERN and Tianjin Capital

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

The idea behind CHAODA MODERN AGRI and Tianjin Capital Environmental 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..